As 2014 comes to a close, I started to grow reflective of some of the articles that I read that, are not so much finance related but somehow stuck to the back of my head. One of them that I cannot get rid of is how the world would change in the next 10 years.
As we embark on a trend of building up wealth so that we are less dependant on our human capital, the way I see various technology maturing that can have a profound impact on some jobs that, used to employ a large number of people, but are very much aided by these developments that they become better. In the process, number of people required can be cut down and perhaps eliminated.
We could see NTUC, cafes employing more information technology, thus alleviating costly Singapore man power issues. Robots and artificial intelligence may improve supply chain management to require less manpower, self driving cars, what Google have been trying to push hard on, may create an Uber like service that requires less taxi drivers.
All this mean is that much lower value work may be eliminated. What are we going to do in such a scenario.
Would my line of work be affected? I think so. The past years have seen virtualization and cloud change the way we deploy servers, application and do system administration. We have to evolve.
At the end of the day, the more value you deliver, that cannot be easily articulated and systemize, the hard it is to replace you. You might think what you do is hard to replicated but technology will tell you other wise
“Software substitution, whether it’s for drivers or waiters or nurses … it’s progressing. … Technology over time will reduce demand for jobs, particularly at the lower end of skill set. … 20 years from now, labor demand for lots of skill sets will be substantially lower. I don’t think people have that in their mental model.”
– Bill Gates,
The year of 2014 in terms of wealth building have been influenced greatly by Smart Beta and Roboadvisors. It used to be the case where some smart investors derive that buying small caps consistently outperform the market, buying low PE or PTB businesses consistently do better, or that buying momentum stocks outperform.
It used to be the case that you need an advisor to help you make sense of your wealth.
What really captures my attention was how things that consider hard to replicate and systemize in the past, people like AQR, Wealthfront and Betterment is able to systemize and productize.
The shift in awareness of exchange traded funds have enabled institutions to create cost effective products based on these well research advantages over the traditional buy and hold. What this means is that a wealth builder can over time form a portfolio that build wealth more effectively, while facing less of the psychological problems that traditional DIY wealth building suffers from.
This will not happen overnight, but that future is not too far away.
Imagine being able to build wealth like Warren Buffett at the cost of a few basis points in expense.
The shift from active to passive and the changes that technology will pose challenges for the traditional stock picker. The shift from active to passive in one way means that there are less people who take an active approach to voting for ‘projects’ or ‘businesses’ that they think deserve more money.
2014 have seen some difficult in the USA where more SME stays private longer and more of the IPOs are really large companies. I am not sure what brought about this, but rules and regulations might be a bigger reason.
At the end of the day, business can only flourish with capital and that comes from people that believe to a certain extent in them.
Technology have always been sold as something value based investors try not to get into, because it is fast changing and hard to understand. Because of that, many wealth builders take it as a cue to steer away from it.
My thoughts is that, we are always surrounded by technology, the railroad in the past is a technology, electronics is a technology, computers is a technology. Each of these gets matured and people understand them better.
Now we see more value based investing funds investing in matured IT companies because of the way these business throws free cash flow.
As individual investors with traditional business, understanding to a certain extent how new substitutes enhance or poses a threat to the business you own are rather important. And this means that you have to find your own way to get educated. And this is why this game isn’t easy at all.