What Big Teeth You Have!

18th of December, 2017

It was Little Red Riding Hood who naively said “What Big Teeth You Have’ to the Big Bad Wolf. His response “All the better to eat you with’ has struck terror into the hearts of many a child.

This same feeling of terror is currently being felt by many segments of society as technology bares its metaphoric “FAANGs”: Facebook, Amazon, Apple, Netflix and Google (now renamed Alphabet).

It’s not just the older or less tech savvy people that are feeling the heat. Old business models are under pressure as the relentless technology gains are disrupting commerce.

In 1997, Amazon’s letter to shareholders proudly included the following statement:

“We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.”

Now think about this for a moment. Think about these strategic partners.

  • America Online
  • Yahoo!
  • Excite
  • Netscape
  • GeoCities
  • AltaVista
  • @Home
  • Prodigy

How many of these “important strategic partners” still exist in a meaningful way today? Apart from maybe Yahoo!, (who I think the only person who still uses it is my mother), the answer would have to be NIL!

Technology is moving forward at a relentless pace – paving the way for opportunity whilst leaving a trail of destruction behind.

With the rapid changes occurring it makes you wonder which of the FAANGs will soon pale into insignificance?

But before they do enormous productivity gains will be created which can only be manifested back into share and property prices.

The thing about the FAANGs is its only their dominate market position that creates a barrier to entry. Unless they continually reinvent themselves their technology will age and gather dust and become completely superfluous, just like the once mighty Commodore 64…..

Compare this with an industry with very high barriers to entry like gaming or infrastructure that are protected by Government Granted licenses.

The investment world is on steroids now – Driverless Cars, Nano-Computers, Bitcoins, Virtual Reality, Robotics, Deep Learning and so the list goes on. All of which will be attacking traditional industries and markets.

As investors, we need to be nimble and on the lookout for those disruptive companies that will make industries and entire sectors as redundant as a Sony Walkman. New business will rise to dominate future industries, redefining old markets just like MacDonald’s and Coca-Cola did before them. But which ones will they be?

Understanding the cycle provides us with an unfair advantage, enabling us to see Bubbles and Crashes before they occur.

This is an exciting cycle of change and opportunity. As the blacksmiths of days gone by found out the hard way, it can be painful to be married to an old way of thinking…

At Calnan Flack we are always challenging our thinking, looking for the opportunities. Currently, there are so many investment opportunities available and we would love to help you. So whether you are seeking education or require some assistance with you investing – we are here to help make your investment life better. We would love to hear from you.

Let’s get started

If you want to avoid the mistakes of not understanding the dangers of investing without an understanding of the Economic Cycle, then why not have a chat to us about how we can help?

You have nothing to lose except a few minutes of your time and everything to gain.

So… let’s get started.

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Disclaimer: Any opinions or recommendations expressed here do not purport to Financial Advice but rather should be considered General Advice and does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. Should Financial Advice be sought, we suggest you seek such advice from an appropriately qualified advisor. Any growth rates, yields, rental income, tax rates, interest rates, depreciation rates, inflation rates Dividends per Share (DPS) and Earning Per Share (EPS) etc shown are estimates only and should not be used as a guide to future performance. Past performance is not necessarily a guide to future performance and should not be relied upon for this purpose. Authorised Representative of PGW Financial Services Pty Ltd – AFSL 384713 ABN 15 123 835 441.