This Industry is Ripe for Disruption

16.12.2016 • Tech

Nick O’Connor – Capital and Conflict (Great Britain) –

Today I am going to show you how to understand and invest in one of the most exciting, world changing trends of the 21st century.

It involves a trillion dollar industry that’s ripe for disruption. It’s already sucking up huge amounts of money and manpower. And the potential rewards are enormous.

I’ll show you why today. But then I have a prediction. You’ll read what I have to say, then think: that’ll never happen. And those three words could cost you big. Don’t believe me? Fine! Let’s dive right in.

Disruption dead ahead

A simple way of thinking about how new technology disrupts existing businesses is that it increases efficiency. That sounds more boring than it actually is. Another way of saying it is technology helps us do things cheaper, faster and better. So in a sense, highly inefficient industries are most ripe for disruption.

Transport is one such industry.

The average car is parked – not in use at all – 97% of the time. That’s incredible! Then of course you have all the time spent sat in traffic, either stationary or crawling along, which is another huge inefficiency. Add all the time that commercial vehicles – lorries, taxis, buses and other public transport – are stationary or not in use and the picture gets bleaker.

That’s all going to change. Technology will eliminate these major inefficiencies, and much sooner than anyone realises. I’m talking about driverless cars.

Wait! Don’t dismiss the idea. I know most people I speak to do. They immediately think, “Too many people like driving for that to really take hold”. Or “I’m not going to share the road with a robot”.

They’re all reasonable objections. I’ll address each in turn in a second. I’ll also explain why these very objections make this opportunity even more compelling.

First, I wanted to share Sam Volkering’s view on the matter. Sam’s a “futurist” and investment analyst who specialises in pinpointing extremely disruptive small tech companies. He thinks there’s a huge opportunity in “the future of mobility”:

Lack of vision, and resistance to change, can kill a business. If you aren’t able to take a view on the future – see the trends shaping – then you’ll miss the boat. You’ll miss the change.

Right now, there’s a shift underway that’s remarkably similar to the transition from the 1980s, where we went from commercial, or business, computers to personal computers and the PC revolution.

The signs are all there – they’re easy to see. But many people I speak to about this massive shift are resistant to it. They don’t want to accept that it’s a dead certainty. They can’t see the future coming at them; even though it’s right there in plain sight.

But if you’re savvy enough to understand how the progress of technology works, then you have a once in a lifetime opportunity to invest now at the ground floor; an opening that gets your foot in the door of the biggest technological change since the PC revolution.

We’re all familiar with the idea of driverless cars by now. Virtually every major car manufacturer is making one, as are major tech firms like Apple and Google. That doesn’t just happen by accident: the technology is almost there and the “first mover” advantage will likely be significant.

But here’s the first thing to keep in mind – the first driverless cars won’t go on sale for the regular punter. They’ll be commercial vehicles. The commercial imperative of having cheap (or free once upfront costs are paid) drivers that never need to sleep, never get ill and don’t take days off will be significant.

There are already HGV vehicles being tested with this technology. Buses won’t be far behind. And of course, taxis will likely be the first major interaction most of us have with driverless cars.

The second point is… you will probably never need to own one. The driverless car completely removes the need for ownership. Driverless cars turn journeys into commodities, the price of which would collapse the bigger the network grows.

There’s a number you can put on this. Traditional car ownership costs, on average, $1 per mile (when you factor in buying the car). Once an autonomous, driverless car can do the same journey for less, the economics favour renting over owning.

Ok, so you may not be convinced. I imagine that’s because you simply can’t picture yourself not owning a car. (If I’m wrong and there’s another reason, get in touch at nick@southbankresearch.com.)

But here’s the thing. The industry is clearly moving in this direction. And there are vast numbers of people who will opt to never own a car as it’s easier and cheaper not to. That creates an investment opportunity, whether you can see yourself in a driverless car or not.

I asked Sam how he’d go about profiting from revolutionary companies whose technology could disrupt the industry. His idea is to look beyond the companies developing and look at the wider network. Loosely speaking, you can boil that down to three things: technology that helps vehicles seecommunicate with one another and learn (SCL).

Taken together, those three elements are what will create the conditions for driverless vehicles to thrive. They’d need to see, so consider looking at firms developing computer vision software. Those images would need to be shared by an overarching network – so every car can see what every other car can see and act accordingly. Again, look at software firms developing this (smart cities, connectivity software and Internet of Things firms). And they’d need to learn and improve. There are large numbers of machine learning firms out there. Those specifically tailoring the learning to vehicles will prosper.

This is the infrastructure that will make the revolution possible. It goes far beyond a single car driving itself. It involves a complex network of smart machines operating above and beyond regular life. It’s being developed right now. And the opportunity is enormous.

I’ll give Sam the last word on when it’s coming – and why now is the time to move:

The self-driving car is exactly like the “automobile” from the 1900s. It’s like the change from horse and cart to automobile. It’s that radical a change. And it’s happening right now, right in front of your eyes — right next to you on the motorway.

Google’s self-driving car fleet has already completed over 1.609 million kilometres of real-world testing. That’s the same as driving around the world 40.15 times.

According to Google’s former lead developer of the project, Sebastian Thrun, fully automated cars could achieve three monumental feats. They could allow us to:

  • Reduce traffic accidents by 90%
  • Reduce wasted commute time and energy by 90%
  • Reduce the number of cars by 90%.

Chunka Mui, author of Driverless Cars: Trillions Are Up For Grabs, says,

“Just in the U.S., driverless cars will put up for grabs some $2 trillion a year in car-related revenue and even more market cap. It creates business opportunities that dwarf Google’s current search-based business and unleashes existential challenges to market leaders across numerous industries, including carmakers, suppliers, auto insurers, energy companies and others that share in car-related revenue.”

If Chunka is right, then this is one industry to get involved in right now. If you deny its existence, and wait too long, then you’ll miss the wild ride ahead.

I’ve asked Sam to prepare a report on his top picks for investing directly in this. He’s working on it now. Look out for it in 2017. For now though, answer me this: are you in?

Answers to nick@southbankresearch.com.

-Read more at www.capitalandconflict.com-

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