Where should you put your money?
Let’s stipulate that digital technology will continue to generate change and wealth. If that’s true – and it is – then where should we move our chips?
There are already lots of investment funds that focus squarely on digital technology: if you have
There are three that scream out: healthcare, entertainment and war.
Healthcare is an easy pick where costs continue to rise. Those dedicated to greater healthcare profitability, especially in the diagnostic and straightforward treatments areas, need to reduce costs. Cost containment is the best answer because there’s only so much money available to keep people healthy. Data suggests that when costs rise, people (AKA “customers”) stop taking their medicine and stop going to the doctor. This is bad for healthcare profiteers for many reasons: medications and doctors can prevent larger health problems and thereby reduce insurance claims. So costs must be reduced to keep spending – and profits – at acceptable levels.
Digital technology will impact healthcare in many ways. The areas where DT will most directly impact healthcare costs include the use of big data for improved, faster and cheaper diagnoses, wearables (for continuous patient monitoring), automated reasoning (to make continuous big data actionable), and self-administration, where patients take greater and greater control over their own bodies. Healthcare cost management can only happen with digital technology. The field has long exhausted other significant cost control/profitability strategies and tactics: how high can deductibles actually rise? How much can medication actually cost before no one buys it? Making US healthcare more expensive for everyone is ultimately self-defeating. Profit walls will be hit quickly, as patients stop paying high deductibles and buying expensive medications – which will ultimately increase healthcare costs as patients receive treatment for heart attacks versus “consuming” statins that reduce the risk of heart disease.
Compliance is another area for digital technology. Wearables make it possible to watch, monitor and remind patients about what they have to do to stay healthy. They can also talk to other wearables located on loved ones and even employers who all have vested interests in compliance.
There are countless high-leverage healthcare opportunities for digital technology. Professional fund managers can tell us about the “best managed” healthcare providers but the digital market is ready made.
Entertainment – broadly defined – is also a sure winner. It speaks directly to Millennials, Gen Y and Z – growing markets with the biggest digital wallets. It includes technology that enables social media, video, virtual reality, travel, sports, transportation, music, games and all forms of physical, emotional and intellectual pleasure.
Here’s what the Institute for Global Futures has to say about digital entertainment trends:
- "New digital technologies will reshape the economics, production, distribution, and marketing of the entertainment industry.
- Traditional media enterprises must learn to adapt new Internet and computer technologies to maintain competitiveness.
- The convergence of the Net with TVs, telephones, kiosks, autos, and wireless devices will create many new media channels.
- On-demand interactive entertainment content that is personalized for our preferences will be a standard feature.
- Advanced virtual reality bundled with digital agents and holographic entertainment worlds will transform our experience of entertainment.
- Movie theaters will receive digital broadcasts and satellite downloads of movies, video conferencing, and other interactive programming.
- Faster, smarter, and more powerful multimedia communications devices will enhance our capacity for producing and distributing entertainment.
- Digital TV will provide new programs where we will experience real-time participation with the media content, personalities, and shows.
- Edutainment, the merger of entertainment and education, will offer a new genre of programming that will be greatly in demand.
- Nontraditional entertainment producers, empowered by Power Tools, will change the industry, offering new products, channels, and innovations."
Put another way, look what’s recently happened with the value of Disney, Electronic Arts and
War is always profitable. Digital technology will make it even more so. There are well-defined trends around automated war, predictive analytics and automated military intelligence.
Sandra I. Erwin lists the top ten disruptive “war” technologies:
- "Truly Autonomous Weapons Systems
- Transformational “Big Data” Tools
- Holograms for Training
- Super-Powered Soldiers
- Hypersonic Missiles and Space Planes
- Drones Manufactured On Demand, 24/7
- Hydra-Like, Invincible Vehicles
- Inexhaustible Power Sources
- Jam-Proof, Reliable Communications
- Revolutionary, Stealthy Low-Cost Warships"
The first major trend here is the increased use of drones. While expensive today, they will become cheaper and cheaper over time. Drone and other remote/automated activity will occur from the home offices of tacticians responding to threats in real-time. There are others. War and all conflict as we know it today will transform itself throughout the 21st century. Drones in the sky and other digital responses to 20th century war strategies and tactics will replace expectations about the need for “boots on the ground.”
The most significant “weapons” in the 21st century are already digital and 21st century soldiers are hackers, not foot soldiers. The idea that the US will deploy troopsyear after year is weakening, and if it weren’t for the jobs created in Congressional districts and campaign contributions from defense lobbyists, the US would buy a lot fewer guns, tanks and ships. Instead, it would focus on digital intelligence, smart drones and other digital technologies that might prevent and win global wars.
I am not a professional stock picker and I understand that simply focusing on an emerging technology with huge application potential is not enough to justify investments in specific companies. But I know enough about trends to identify the technologies most likely to monetize.
Like you, I can also detect the horizontal technology trends most likely to fuel the most vertical industries. The big three discussed here – healthcare, entertainment and war – are the readiest vertical industries. There are others. The well-run horizontal enablers of these verticals will make enormous profits for their investors. While all investments are problematic and to some extent unpredictable, these three growing digital vertical industries represent huge investment opportunities.
Bet well.
