Disruptive technology and investing

Disruptive technologies are changing the way we live, and are simultaneously destroying businesses (and jobs). To cope with these changes we must, as a society, be very adaptive, and forward looking. We aren’t always so. Look at a few examples.

Kodak was a market leader in photography in 1998, with an 85 per cent market share, and 1.70 lakh employees. By January 2012, it had filed for bankruptcy, having failed to see the threat to its business from digital photography. Its market cap, $30 billion in 1997 fell to $145 million when it filed for bankruptcy. The company, which had survived for 145 years, went bankrupt because of failure to foresee the fallout of technological change. Several businesses are being affected. Uber, for example, is a software company with the biggest fleet of cars, which it doesn’t own. Similarly, Airbnb is a software company that has the most hotel rooms, which it doesn’t own.

We have all heard of the Google car, which drives itself, and is expected to debut in 2018. The uberification of the auto industry is expected to sharply reduce demand for privately owned cars; some estimates show a 90 per cent drop in car demand!

The auto industry is also undergoing radical transformation from electric vehicles. The inventor of the lithium-ion batteries that has enabled all smartphones/ tablets/ electric cars, is 92-year-old John Goodenough. He has developed another solid state battery which is safer and faster charging, and will make lithium-ion redundant. Demand for electric vehicles would zoom, and auto companies who don’t have them will be hit.

Autonomous vehicles will change not only industry dynamics but also lives. Fewer vehicles on the roads will free up space for housing and parks. Furthermore, autonomous cars are safer! Accident rates are now one per one lakh km. This will drop to one per 10 million km — a hundredfold improvement.

This column had earlier referred to the falling costs of renewable energy; solar producers are quoting ₹3/unit. Soon it will also be possible to affordably store power. Homes can thus become off-grid, generating solar power during the day, storing it in batteries for use at night. This will, in turn, affect the power generation and distribution companies, and investments in them. Low electricity costs will bring down the cost of desalination, which will solve another of humankind’s pressing concerns, viz paucity of drinking water.

IBM has developed a software, Watson, which gives accurate and cheap legal advice to anyone, and which has rendered young lawyers jobless. Watson also helps with medical diagnosis.

In the US, the technology of online shopping has badly affected retail stores. Sears, a large retail chain, in its latest 10K filing, expressed doubts whether it could sustain as a going concern. Contrast this with the situation in India where retailer D-Mart doubled on its first day of listing!

India still presents a good story for global investors, provided we stick to sensible economic reforms and take steps to decide cases faster. This is why college endowment funds are increasingly investing in India, not finding suitable opportunities with low interest rates ruling around the developed world. As long as India does not do anything foolish, the stock market will do well!

(The writer is India Head, Euromoney Conferences. The views are personal.)

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