From landline to AI: What does faster innovation-adoption rates mean for investors of today? [Wednesdays: The Independent Investor]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
We’re excited to share with you our topic for today’s “The Independent Investor.”
Every Wednesday, we publish articles about basic investing tips. Our goal is to help you strategically think about your financial choices through the coaching comments and insights that we write about.
Today, we’ll focus on the importance of keeping up with the innovations in the business and investment landscape.
Read on to know how you can employ winning strategies in your investments amid changes in various industries.
The Independent Investor
In the past, adoption cycles were a slow process.
—it took 68 years for 50% of U.S. households to own a landline after it was invented…
… 11 years to have Internet access…
… and nearly a decade to adopt the use of smartphones.
Today, adoption cycles are picking up speed. As Professor Joel Litman said, personal use of artificial intelligence (AI) is going to blow the above figures out of the water.
Think about this: The revolutionary chatbot ChatGPT garnered a whopping 1 million users just 5 days after it was released in November 2022! Within 2 months, OpenAI, the company behind ChatGPT, was worth USD 29 billion.
These figures are insane!
According to Professor Litman, this trend isn’t going anywhere. Most likely, many more new technologies will get adopted at increasingly blistering speeds.
That’s why in this article, we’ll explain how you can best keep up with the rapid pace of tech innovations. It’s crucial for you to know this because new products are changing how we live our lives… and perhaps, who’s going to win in the stock market.
The Technology Adoption Life Cycle
Are you familiar with the “innovation-adoption curve?”
This theory was developed by Sociology Professor Everett Rogers in 1962. Its purpose is to help you know when you should pay attention to new technology.
Rogers initially used the theory to study adoption rates in the agricultural sector. Eventually, he discovered that the tech sector follows a similar and predictable adoption pattern.
At the forefront of the curve are the innovators and early adopters who make up around 16% of the population. These people are comfortable playing around with new and incomplete technology.
Between the early market and mainstream market phases of a new product is the chasm. After this divide comes the early majority, late majority, and laggards, who won’t start adopting a product until it is finalized.
In the early adoption cycles, the chasm used to take years or sometimes even decades to cross. Now, it’s starting to compress and that explains why tech adoption rates seem to get faster.
So… what does this mean for many investors around the globe?
With the crossing of the chasm happening faster, investors need to change tactics.
Nowadays, it’s less about finding an investment that will win from new innovations like ChatGPT. After all, the winners will often be private companies or those that are quite difficult to identify in a fast-paced industry.
Investors should instead be focused on the bigger risk: DISRUPTION.
This is because some companies are bound to stay on top in terms of adopting new technologies, while others are bound to be left behind.
Generally speaking, innovative companies cannot rest on their laurels. This explains why with the rise of ChatGPT, Alphabet CEO Sundar Pichai issued a “code red” alert to his team.
Alphabet claims to have top-tier AI… and with the threat of ChatGPT, Pichai is pushing Google’s leadership to redefine its AI strategy.
This makes investors’ jobs tougher. As each innovation cycle keeps getting faster, they need to consistently monitor whether companies are still being innovative or if their existing models are being disrupted.
So, as an investor, make sure to “cross the chasm.” As new technologies like AI start rising, do your best to understand them.
Identify which companies are pushing those innovations forward, then find the ones at risk of being disrupted by new technologies. Once the post-chasm phase comes and the products become available for individual use, give them a try.
You’ll be surprised by what you come up with and how these innovations can improve your processes.
You can do the same for the companies you’re researching! Some firms fail to explain their business models or technology well, so trying their offerings will help you understand them better.
Take note of this investing insight!
Always remember that the companies, investment processes, and strategies that succeeded 5 or 10 years ago aren’t guaranteed to continue succeeding in the future.
So, the faster you start understanding new tools—and the sooner you begin testing them and learning to adapt—the higher your chances of success.
It’s time to keep up in today’s increasingly fast-paced world!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
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