Very interesting presentation. The guy is an optimist and does not see the negatives or ignores them. I don’t know what they are but suppose the growth rate is half of what he says, what does that do to the investment thesis considering that time is money?
Seba mentions the “S” curve but does not dwell on the subject. I have probably talked more about the “S” curve at TMF than any other Fool or fool. The “S” curve is not related solely to disruptive technology but to growth in general, even to the growth of yeast cultures and it can be used as the timer of your technology investing. The theory is that the lifetime of any disruptive technology can be divided into three thirds of equal or similar duration. The inflection point between the first and second thirds, the curve in the hockey stick, happens at about 15% market penetration. The top of the “S” start at around 85% market penetration. The fast growth happens in the middle third. The first third is very risky, lots of technologies fail to “cross the chasm.” During the last third the technology, while no longer growing, can be a very fat cash cow (Microsoft?).
If you buy the “S” curve scenario you should wait until the curve in the hockey stick before making an investment. Next, you should stick with the investment even though more than likely you’ll experience 50% stock price drops. As market saturation approaches its time to end the investment.
The “S” curve is technology wide, not company specific. A company like Apple can have successive “S” curves: iPod, iPad, iPhone, etc.
While I believe the above to be accurate it does not mean it is easy to follow which is part of the reason I’ve stopped investing in individual technology companies preferring instead to invest via ETFs. Saul is right when he says that one can do better than the indexes (ETFs are index funds) but one has to be very agile to do so. Technology indexes beat the overall market and I’m satisfied with that.
A curious thing about the presentation is that it has we worried about investments in fossil fuels. My one position is Core Labs (CLB) which is in the oil service industry. I’ve been expecting it to rebound from cyclical oil bottom but if Seba is right, oil will go down some more, not back up.
To conclude where I started, suppose Seba is right but off in his timing, what will it do to your investment thesis? The main difference I see between Seba and most forecasters – which makes him more credible – is that he is using comparative costs based on real world prices to drive the technology adoption, not just some Sci-Fi like wishful thinking.
Denny Schlesinger