Accelerated tech innovation threatens investor returns, strategy head warns
Investors, investment researchers and fund managers have been warned by an industry insider that returns could be significantly weakened if they fail to prepare for a predicted exponential acceleration in technology change, including the advent of quantum computing and further innovations in AI, and shrinking business lifecycles.
Grant Pearson, who heads strategy and distribution at Sydney-based equities manager Insync, has advised the wealth sector to “quickly create robust means to assess and counter the acceleration of technological change” to effectively counter what could prove a major threat to investment returns.
He further urged investors and researchers to not rest on their laurels, acknowledging the wealth industry “has a reputation for being slow to change, with egos routinely getting in the way of adapting.”
“Investors need to check carefully that their fund managers are very clear as to how these factors impact their investment processes if they are not to be blindsided and saddled with disappointing returns,” Pearson said.
In the past, he noted, investors had months or even years to discover an emerging technological breakthrough, assess it, seek views, and then act.
In this fast-changing investment environment, investors now have “next to no time” to prepare for changes, Insync said. Further, many in the industry often lack the requisite skills to assess to understand these changes effectively.
“In fact, the average life span of successful businesses is being compressed into less than 10 years duration,” Pearson said. “This is disruption accelerating at the same time that timeframes are compressing.”
He cited the recent uptake of Meta-owned social networking platform, and Twitter (now ‘X’) rival, Threads.
Within five days after its launch, Threads’ user base hit 100 million.
For context, Facebook (launched in 2004) took 4.5 years to reach this same milestone, Instagram took 2.5 years, TikTok achieved it in nine months, while AI chatbot ChatGPT (launched in November last year) took just two months.
“The reason this means big trouble for investors is that they could be in the right company today and, as little as weeks later, be in the wrong company,” Pearson said.
With companies increasingly dependent on technology innovation to gain a leading edge, this warning was extended to firms beyond pure technology plays.
“All companies could be affected as they all rely on technology of some sort,” Pearson said.
“If their competition embraces new technology better and faster, a dominant company today may find its revenues and profits under immediate threat. And let’s not forget brand new competitors for firms that technology has opened the gates to.”
Business lifecycles are also shrinking at record pace, Pearson warned, with tech disruption accelerating at the same time that timeframes are compressing.
“The average life span of successful businesses is being compressed into less than 10 years duration,” he said.”
Quantum-age variations of Moore’s law also need to be factored into investment decisions, Pearson said.
“Google’s latest Sycamore Quantum Computer, testing now with operational status by 2029, is an astonishing 241 million times more powerful than today’s fastest supercomputers!”
“In other words, Sycamore can solve in seconds a problem that takes today’s fastest supercomputer 47 years.”
“The alarming thing for the investment community is that we are only at the very beginning of this acceleration. It is akin to sitting in a rollercoaster as it has just tipped into its near vertical first run.”