Newfangled companies are appearing and developing a global presence almost overnight. They are omnipresent and you almost forget that in many cases, these companies, including Facebook (2004), Spotify (2006), Airbnb (2008), Uber (2009), Snapchat (2011) and Alibaba (1999), were founded no more than a decade ago
Besides being relatively new, these companies have something else in common: they operate platforms where value producers and value consumers participate in a direct exchange. According to the researcher, the platform companies reinvigorated an old, frequently forgotten business model: matchmaking. In a traditional value chain business model, standardized inputs are transformed into standardized outputs (products) through a standardized production process. It is about the quality of the product.
In the platform economy, it is possible for the winner to take all due to the self-reinforcing nature of the network effect. Take for example the market dominance of Facebook, Spotify, Airbnb and Uber. The simpler the product, the easier it is to dominate the market. Industries where platform companies already have made inroads are e-commerce and marketplaces, fintech, internet software and services and social messaging and media.
Artificial intelligence: our savior or humanity’s final invention?
Van Oerle refers to three forms of artificial intelligence (AI): narrow, general and super artificial intelligence. “Narrow intelligence is used to optimize one certain task or specializes in one specific area. An example is playing chess, or arranging timelines on social media platforms according to your interests. General intelligence refers to being able to do everything a human can do and super intelligence exceeds general intelligence in that it is superior to the most intelligent benchmark. General intelligence is often seen as the holy grail and super intelligence as the feared and unknown future. The Hollywood robot is a clear example of super intelligence.”
As investors, we see artificial narrow intelligence as presenting the best opportunities. This is already being used today and advances in data and computing power in combination with a stronger focus on specific applications are important improvements compared to earlier AI boom periods. We focus mainly on machine learning. The potential for growth in this area is great, given the latest advances in algorithms and data.
The technology industry is currently putting a lot of effort into machine learning or making machines intelligent. Google, Facebook, IBM, Apple, Yahoo, Microsoft, Amazon, Baidu and Alibaba have large portfolios of artificial intelligence start-ups.
For a public equity investor, it is not possible to invest in unlisted start-ups and an investment in technology giants will provide only modest exposure to the artificial intelligence segment. It is therefore best to consider pursuing a bucket-and-spade strategy until true winners stand out. Instead of considering the companies that will eventually provide artificial intelligence services, it is better at this point in time to look at companies that provide the resources used in that process, the so-called ‘bucket-and-spade suppliers during the gold rush’. For example, investing in producers of GPUs (graphics processing units), processors, computing power, sensors, voice recognition and data providers.
AI can be a disruptive force. Companies or jobs at risk are the ones that offer specialist goods and services. Progress in natural language processing, for example, poses a direct threat to today’s translation services.
Sugar is the new tobacco
There is a direct link between sugar intake, the risk of obesity and therefore the risk of diabetes. Our increased sugar consumption has led to an obesity epidemic, which is increasing the prevalence of diabetes, heart attacks and clogged arteries. We expect a critical stance to be taken against sugar, as there is against tobacco. The food and beverages industry will be faced with a decline in the volume of their sugary products as consumers start looking for healthier alternatives.
Consumers are becoming more aware of the dangers of sugar and are trying to avoid it. That’s why we do not invest in food companies that use a lot of sugar in their products. Another investment possibility Grootveld sees are mergers and acquisitions motivated by the goal to produce healthier foods. Some food processing companies are aware of the trend towards reducing sugar consumption and have been buying up companies that provide healthy alternatives.
Robeco does not expect the food industry to take the first step in lowering the sugar content in its products. It’s up to consumers themselves to reduce their sugar intake. Companies will not lower sugar content voluntarily, as blind tests have shown that consumers always prefer the sweetest alternative. The more the general public becomes aware of how harmful sugar can potentially be, the more the food and beverages industry can be named and shamed. Until the food and beverages industry gets such a wake-up call, we expect the volumes of their sugary products to decline as consumers seek healthier alternatives. If the food industry embraces the trend towards reducing sugar as it did with fat in the eighties and nineties, it could reduce healthcare costs for society.
Henk Grootveld - Head of trends investing - RobecoBLOG COMMENTS POWERED BY DISQUS