Innovative and high-tech companies have a reputation for growth and the potential to make investors rich. How do they do it? In some cases, the most successful ones completely shatter all common business paradigms by creating “disruptive technology.”
Disruptive technology
A great example of disruptive innovation is Johannes Gutenberg’s invention of the printing press in 1450, revolutionizing book production and the consequent spread of knowledge. Today’s generation has seen many similar revolutions, such as email (replacing postal communication), and the development of the internet. These days, those in search of information can simply look up a reference online without having to go to a library. The disruptive technology of the digital world results in lower costs and improved efficiency in many ways. However, it may also have its detractors, rather like the Luddites in England, who smashed newly invented looms during the Industrial Revolution to protest against the unemployment that the new machinery caused among craftsmen, whose hand-weaving skills were no longer needed in the textile industry.
The newest disruptive technology of the modern age is the 3-D printer. Currently in its infancy, the 3-D printer may change the face of the manufacturing industry forever. If people can simply produce a needed item by pressing a button on their printers, the need to go shopping in the traditional sense of shopping malls, or even online, will be eliminated. Costs may be lowered, production time may be quicker, and products can become more individualized.
While on the personal level disruptive technology may be a boon, what will its effect be on the larger global economy, and specifically on countries such as China, which depend on their manufacturing industries? The greater implications of disruptive technology cannot yet be assessed. Will the consumer be the ultimate winner or loser?
To learn more about using disruptive technology in helping determine your investments, listen to a podcast on the topic.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published July 9, 2014.