Kate O'Brien - Director

We recently enjoyed an insightful session with Dom Guiliano –  Deputy Chief Investment Officer at Magellan Asset Management, a specialist investment management business based in Sydney managing global equities and global listed infrastructure strategies.

Here we share some of Dom’s key points from his presentation.

As prudent investors, we cannot ignore the technological developments that are almost certain to provide substantial threats and opportunities to businesses. Consider some examples which demonstrate the rapid disruption from technological innovation:

  • In 1998 Kodak sold 85% of all photographic film. By 2012 it filed for bankruptcy.
  • In 1998 Nokia was the world’s largest mobile phone manufacturer, and in 2013 sold its loss-making mobile phone business to Microsoft.
  • Newspapers’ share of the global advertising market fell from 35% in 1999 to 12% in 2015.
  • Facebook was founded in February 2004 and now has in excess of 1.6 billion monthly active users.
  • Airbnb was founded in 2008 and is now the world’s largest accommodation company.

There is a risk that we underestimate the impact of technological change. Technological progression is exponential, which means that technology evolves at a multiplying rate rather than at steady intervals. Computation power for example roughly doubles every two years and the iPhone 5 has twice the computational power of the most powerful super computer in 1985. It is estimated that the amount of digital data in the world is doubling every two years. It is thought that more data has been created in the past two years than in the previous history of the human race.

Some predictions for the next 10-20 years include development of intelligent virtual personal assistants that know who you are, understand natural language, anticipate what you want, read and understand your email, answer questions and organise your life. Early versions already exist including Apple’s Siri.

There is evidence that a breakthrough in artificial general intelligence (AGI) is rapidly approaching. AGI is a computer system that is as smart as a human across any intellectual task, including complex reasoning, thinking abstractly and learning from experiences.

Development of augmented and virtual reality as it advances could replace any real world experience such as shopping or travel.

Digitalisation and automation of white collar tasks are likely due to advancements in artificial intelligence, and could one day replace many white collar professionals. Similarly autonomous specialised robots could replace highly specialised manual labour such as surgeons.

Driverless car technology is well progressed and could dramatically change how cars are used.

Medical science breakthroughs will continue with advancements in genome sequencing, epigenetics and gene editing.

It is likely that advancements in technology will disrupt many industries and economies over the next 10-20 years. As investors, we need to assess many issues that could arise from rapidly advancing technology, including whether some industries may be safe or immune, and how do you value businesses in a rapidly disruptive world.

A full feature article on this topic is available in the Magellan Asset Management Annual Investor Report. To discuss Magellan, or any aspect of your investments, please do not hesitate to contact me on (02) 9908 9888.

Kate is an Authorised Representative of Hillross Financial Services Limited (AR Number 1007833).