Why advisors must move fast in these exponential times

Founder of independent explains why Moore’s Law means the future will present a huge number of investment opportunities

Why advisors must move fast in these exponential times

Advisors must educate themselves about the exponential impact of tech if they are to take advantage of future investment opportunities.

In the second part of his interview with WP, Ric Edelman, the founder of the largest independent advisory firm in the U.S., Edelman Financial Engines, warned finance professionals that the future is going to be something of a shock for those who are unprepared.

The root cause is Moore’s Law. Gordon Moore, the co-founder on Intel, believed that every 18 months computers double in speed, their price falls 50%, and their size radically shrinks. The result is that this decade computers are going to be so small, they will be the size of a grain of rice, and implantable in the human brain.

Software intelligence by the end of this decade will be indistinguishable from biological intelligence, something scientists are calling singularity. Edelman said: “What does this mean for us as investment advisors and for our clients during these exponential times? That any company designed for success in the 20th century is doomed to fail in the 21st century.”

Everyone knows about the Kodak-Instagram and Blockbuster-Netflix stories. They are the top of the iceberg in how tech has been destroying companies for years. Insurance, automotive, and banking and brokerage industries are now at risk to name just three. But Edelman believes there are massive opportunities opening up as a result of exponential technologies, like the wearables marketplace, for example, or e-sports.

He explained: “We already have kids earning millions of dollars a year playing video games. Then there’s 3D printing, drones, big data, the entire sharing economy, cyber security, robotics, the Internet of Things, and healthcare. All of these are tremendous investment opportunities in the 21st century.

“As a result of all this, it's projected that the world's GDP, which currently is about $84 trillion, which is twice as big as it was 20 years ago, will be twice as big again 20 years from now. And because here in North America, between the U.S. and Canada, we are the largest combined economic power on the planet, we stand to be the biggest beneficiaries of all of this.”

In Canada, there are ETFs offering routes into this new asset class, as well as a variety of separately managed accounts or turnkey asset management programs. This means accredited investors can buy digital assets directly or can also go with pick-and-shovel firms.

“Let's remember that during the California Gold Rush, it was Levi Strauss, who made the most money by selling blue jeans, not trying to mine for gold himself. As we move forward with exponential technologies, you need to understand how the tech works, so you can understand the commercial value for these technologies.”