This week we were invited to a round table lunch with the Evans & Partner’s Disruption Fund / Walsh & Co team. The function was steered by Jeffrey Cole who is a member of the Disruption Fund’s investment committee. Cole is a well-known guru of digital age who predicted the end of MySpace after Rupert bought the site and considers himself a ‘story teller’ of the digital world. After listening to his talk, he truly is a visionary who is able to gaze into the future and tell it how it is. He leads the World Internet Project at USC and has been at the forefront of media and communication technology issues in the world for more than three decades. He has a rich history serving as an adviser to governments and many of the largest and most successful companies around the world as they craft digital strategies.
Mr Cole’s disruptive predictions include not only driverless cars but he sees TV, retail, banking, social media and sports being disrupted over the next decade. He began his discussion by first foreseeing free to air and pay per view TV broadcasters being attacked by the US tech giants. Netflix and Amazon have shaken up the landscape a few years ago. On the content side they both have more firepower and can pay significantly higher sums for an hour of content than traditional content producers. This has created a change in the market place. Cole says Jeff Bezos is getting ready for an all-out attack on sports broadcasters after Amazon took its first steps into live sports video. With live sports, Amazon is trying to lure in viewers to give them what Netflix cannot, while taking on media companies at the same time. As well as spending billions on TV shows and movies on demand, Cole sees a real possibility that Amazon may make a tilt towards a NFL football deal, Premier League deal, NBA, AFL or even Cricket. Amazon already
ATP World Tennis Tour in UK and Ireland. Is not out of their reach. Amazon has been plotting to take over the world and disrupt every sector it can. Television being the primary one. The opportunity to stream shows over the internet puts Amazon Prime in box seat. Netflix has already proven the model works, Amazon Prime is in an even stronger position. It has tens if not hundreds of millions of subscribers it can market to. It’s only a matter of time.
Cole then went onto to talk about car transportation and driverless cars an area he thinks will be seeing massive disruption. His vision sees the entire car industry becoming completely driverless over the next 25 years. That means no one will own cars anymore. The world will be a very different place. No one will worry about driving under the influence. Cars act like a private jet. At the press of a button a car will arrive at your door step to take you where you desire. A long distance drive to Sydney could be done via a driverless luxury car that contains a bed and movie cinema. Steering wheels, traffic jams, and parking meters will all be a thing of the past. Even speed limits. And all you’ll pay is a monthly membership fee. Car credits will become the new currency and the car will become a media hot spot where tech giants like Amazon can advertise their products. A new generation will grow up with transportation being a convenient and door-to-door method of transportation. Autonomous vehicles are here, but the laws aren’t. Cole claims his Tesla is equipped to autonomous technology and has the capability to drive autonomously. California recently gave the green light for fully autonomous cars without safety drivers to test on public roads for the first time. It’s a major step forward for autonomous technology.
Then came banking. Cole spent a considerable amount of time working with Westpac and some of the other big names and came to one conclusion. The banking industry is screwed. Cole says he’s never seen a company turn its fortunes around after being so highly profitable. So in the same way that Kodak drifted into the abyss, he thinks the banks will follow the same path being unable to adapt to disruptive elements. A survey found that more than half of Americans use more than one bank. Whilst being satisfied with their banks, Americans have no issue in switching, with no bank loyalty. That’s an interesting predicament if say Amazon wants to control the banking space. According to media sources, Amazon is said to be in talks with JPMorgan Chase, Capital One and other banks and financial services firms about setting up an Amazon-branded checking account for its customers. It might be early stages but you can bet your bottom dollar, Amazon has its sights set far beyond checking accounts. What better way to create a more seamless relationship with its millions of customers. They can all pay for what they buy from Amazon using an Amazon bank account. Brilliant.
Unfortunately there is a hefty price to pay from all this disruption. That price is jobs. Cole says disruption is a job killer. Think back to the 1980’s when there was a bank branch on every corner. Then came along the automatic teller machines. In the 1990’s mass branch closures ensued. For bank employees, it was hell. Now fintechs, automation and AI are changing the landscape. In-fact NAB recently announced 6000 job cuts recently. Can you imagine how many taxi drivers will be unemployed in a world of driverless cars or how many grocery cashiers will be left redundant when Amazon Go takes off?
Whether these dramatic disruptive changes will happen is not so much a question of ‘if’ but more a question of ‘when’. Most of these technologies are already here. Electric vehicles have been around since the last decade. It is regulation and society’s ability to adapt to change that slows the process. The world that Jeffrey Cole describes might seem a bit utopian but if you think about it, so would the world back in the 1600’s when the steam engine was first introduced. Our world is constantly evolving and being shaken to the core by technological change, with the radical changes unleashed by new digital, robotic and 3D technologies. No country or market will be spared from this tidal wave of change. New technologies will improve efficiency and thus productivity at a fraction of the cost. Sociological change and a willingness to adapt and modify social, political and administrative institutions so that they fit with new techniques of production will be the new no
The Global Disruption Fund offers clients exposure to disruptive stocks that change the dynamics in the way we live and interact which each other. The portfolio is not designed for income, it is designed for capital growth and for Australian investors to get exposure to the disruption theme. The fund has done remarkably well. Last month it was up 8.2% beating the MSCI All Countries World Index of 2.0%. Over the year the fund was 46.3% beating the index of 19.5%. The Disruption fund can be bought under stock code EGD.ASX. The weekly NTA is $1.95 and share price is $2.00.