5 sectors that are interesting for investments in the long term from a technology perspective.

We tend to overestimate technological progress in the short term and underestimate it in the long term. When we read reports in the media about technological breakthroughs, we are usually disappointed when we don’t see this technology in products a few months later. We then conclude that “technology xy won’t catch on”. In reality, however, all fundamental technological developments are used sooner or later.

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Technological achievements

Most people make the mistake of confusing technological progress in research with the use of this technology by society. The first step is to acquire a technology. This is done through basic research and usually through the massive use of resources. The result is a technological breakthrough, but its use cannot yet be economically legitimized. In general, we speak of a lack of market maturity.

This usually has two dimensions: The reliability and quality of an achievement and the lack of ability to be produced at an acceptable cost. A technology is therefore either not yet good enough or still too expensive. Or usually both.

Adaptation of the technology by society

The second step is about how and at what speed new technologies are adapted, i.e. used, by society. This depends largely on 2 factors:

How much added value can the technology bring to society?

The better a technology solves humanity’s problems, the faster it is adapted. The problems range from complex diseases to something as banal as the water consumption of a toilet. Small, everyday problems usually take precedence over big issues. As a general rule.

Are there any technologies (and products) that have already been introduced that will generate significant added value as a result of the new technology?

More than ever, humanity’s problems can be solved by combining different technologies. For example, the Internet as we know it only became truly ubiquitous when mobile phone technology made the Internet ubiquitous. The combination of technologies provided the solution.

When does it become interesting for investments

From the facts described above, it can be deduced that the second stage, i.e. the adaptation of the technology by society, is of primary interest for investments. It is rarely interesting to invest in basic research unless you can show clear ways of adapting a newly acquired technology. This is usually only the case with strategic investors.

Me as a small investor?

As a small investor, and I am deliberately not referring to small speculators, I should therefore concentrate on companies and sectors that are either:

1. Being able to bring an existing technology to women in the clearly foreseeable future
2. Combining different technologies to create a new application in society

The product created in this way must fundamentally solve a social problem. And this means that all the basic requirements that an industry or sector must fulfill in order to be worthy of investment are met.

List

Here is a small list of sectors where I think we could see a corresponding development:

Battery technology

There are so many applications that are just waiting for more powerful batteries to become available. From electric cars with a range on a par with combustion engine models, electric airplanes and electric chainsaws to smartphones that last a week. Greatly improved battery technology will fundamentally change our lives. I expect to see various innovations in this area in the coming months. The cost of batteries will continue to fall sharply, which will further accelerate adaptation. Companies that benefit greatly from this, such as Tesla, are systematically moving into a better position. I have already written about developments in the battery sector here.

Prostheses

Prostheses have undergone enormous change in recent years. A change that was primarily driven by the use of new, improved materials. In the last 24 months, digitalization has really taken off and we are seeing prostheses that we would not have thought possible 10 years ago. This short video gets to the point

I expect this type of technology to enter the market in the next 5 years and significantly improve the lives of people with such disabilities.

Medicine

Medicine is currently at a turning point. On the one hand, public acceptance of general medicine is declining, as people have realized that medicine offers surprisingly few safe procedures for more complex diseases. Paradoxically, it is at a technological point where a paradigm shift is on the horizon. This is because the decoding of the human genome, coupled with the enormous increase in computing power, now makes it possible to develop drugs virtually.

Instead of using the try & error method to find active ingredients that work in a certain range of constellations in countless series of tests, the models can be calculated. On the one hand, this speeds up the process enormously, but also makes it considerably cheaper. In addition, this development lays the foundation for highly individualized medicine, which is generally regarded as the key to the medical revolution. You can find more information on digitalization in medicine from me here.

Construction industry

Building a house is incredibly complex. Especially in Europe, it is a complex interplay of different service providers and suppliers. And astonishingly inefficient. Significant improvements can be made, from planning and coordination to cost management and the creation of supplier components. Digitalization can make various contributions here and I expect that we will soon see general contractors who, as tech companies, will only take on the coordination and mediation. Building houses with an optimized, digitally supported concept.

A kind of “Uber” for the construction industry. 3D printing will also find its way into the market. Whether this is for the entire building, as shown by a supplier in China, or for individual components is irrelevant for the time being. The fact is that many things that currently have to be ordered, transported and adapted at great expense can be produced comparatively easily using 3D printers. On the construction site – just in time. 3D printers are improving rapidly and we will soon see corresponding suppliers in the construction industry.

Financial sector

The financial sector has the potential to experience a second spring thanks to new technologies. Perhaps not the players that dominate the financial sector today, but the economic area is very exciting. With the increasing disappearance of cash, new opportunities are emerging, for example for parallel currencies that take into account segments other than territorial areas. This may sound totally crazy at first glance, but from a social point of view there is nothing to be said against currency diversity that also allows for private players.

It minimizes the risk for the entire system, dramatically reduces transaction costs and enables a crowd-based financing economy. The underlying driver here is also digitalization and the sharp increase in computing power combined with steadily falling costs. I think we are already seeing the first tentative beginnings of this development. I expect that we will no longer see banking as we know it today in 30 years’ time. Quite simply because it will no longer be necessary. I wrote an article about banking here.

Paradigm shift

Now, I am not an investment advisor and I am not giving investment tips in the strict sense of the word. Rather, I would like to raise awareness of the fundamental paradigm shifts that technological progress is making possible.

Society has to make this change itself. As a rule, it does not do this consciously and all at once, but instead works its way towards a simpler life based on small, personal benefits. In conventional models, the economy tries to deliver these benefits until it can no longer do so and disruption occurs.

Ideally, you should now look for companies that are not stuck in conventional models, but those that can and want to turn the major upheavals and technological advances into new products (perpetual disruption).(Perpetual disruption) The better they already understand what a future product will actually do for you as a consumer, the better. If the people behind it also have an entrepreneurial spirit, i.e. are prepared to tackle something really new, you can’t really go wrong. What then remains is the “residual risk”. As always in life.

 

This article originally appeared as part of my “Transformed!” column on t3n.