For me, understanding the internet paradox gets to the core of how I try to think about this whole area, and perhaps explains my irritation at being asked about technology as a sector. The internet is an enabler on a scale that means any industry can now be disrupted. In many ways, every company is a technology company now – or perhaps none is. This is why I think the term is vacuous.
Of course, it’s difficult to stay away from the nomenclature of markets when the terminology is so widely used by participants, commentators and companies themselves. Personally, I would ban the use of the term technology as I see it as lazy shorthand or, worse, a closed-minded dismissal of a disruptive opportunity. The pre-requisite to investing well in companies labelled technology is no different to other areas. The chief requirement for success is being open-minded.
There are still lots of things I need to push myself to imagine. For example, I can’t see my wife being satisfied with a bunch of virtual flowers on our anniversary. However, most of Tencent’s users have never been used to receiving the physical version, so they enjoy sending and receiving them online. It is my job not to judge such utility but to analyse it, in the same way, I would for physical flowers, albeit the online version offers much higher gross margins.
As a long-term fan of football, I’ve also struggled with the concept of e-sports. But this is a great example of where being open-minded helps – what’s the difference between watching skill and competition on a screen to seeing it on a court or sports field? Looking 20 years into the future, the FIFA e-World Cup may be bigger than the corrupt version played on grass.
I think it is fantastic for us that so many people continue to view technology as different. It presents us with opportunities that others are missing. In fact, I will happily put up with more questions on this area if it facilitates us assessing the prospects for such companies in the same way that we would any other. And, hopefully, we will continue to add value for our clients through such an agnostic approach.
This is the third blog in a three-part series. You can read part one here and read part two here.