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The World is Changing Fast. Worry About It Or Profit From It

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I discovered something interesting today.

15 years ago, on this exact date, I updated my bank passbook for the last time. For the young ones among us, a bank passbook is a small booklet that banks used to issue to all its account holders. Inside, the passbook would list the amount of cash you have in your bank account.

Oh, I remember those days.

My mom will bug me to keep my passbook updated to make sure the correct amount of cash was reflected. To do that, we would have to go down to a bank branch, stand a queue, and get a bank teller to update our booklets for us. It would be years later before automated machines took over that menial task.

We’re a long way from that today.

What we’re not a long way from is the relentless changes in technology. We feel that practically every day. Artificial intelligence (AI) is one of the big ones right now. There’s even a website “willrobotstakemyjob.com” that will give you a statistical probability that robots will take over a given job. Turns out it’s 23% for “Financial Analyst”.

But worrying about what jobs will disappear through technological change is nothing new. Just ask the phone operators 20 years ago.

A New York Times article from 1996 shared this:

“Mrs. Trela has seen the country change — and heard it — as an operator. She has seen rotary phones give way to push-button models then to cordless and cellular phones in people’s cars and pockets. She has seen the introduction of call waiting, which she welcomes, and voice mail, which she loathes.

And now, for her, there is one final change. AT&T announced last week that on Sept. 21 it will close the office in Peabody, Mass., where Mrs. Trela and 130 other operators work. It is the last of what were once 15 AT&T operator centers in New England.”

The article further noted that in 1984, AT&T had 40.000 operators. At the time of the article, that was down to 8.000. Today, Google’s Duplex AI system has the potential to make phone calls on our behalf, and might even replace entire call centers in the future. See for yourself.

I don’t mean to sound flippant about this. It’s difficult for people that lose their jobs, and it’s challenging for those that want to train for a new and different job.

But while there’s the option to mourn the lost jobs, there’s also the possibility to celebrate new jobs that are created by new technologies. These create opportunities for countless job hunters that grew up amidst the technology change.

When I was young, Nintendo was just releasing its first “Nintendo Entertainment System” (NES). Fast forward — and a 2017 article on the website VentureBeat said that there are roughly 220,000 workers in the US alone that are supported by the video game industry.

We Face That Same Challenge As Investors

We can look backwards at what was the way things were done. What used to create big profits. And frankly, a lot of the best investments are those companies that had staying power over time.

But don’t fool yourself for a second – most, if not all, of the companies with staying power embraced changing technology to improve their businesses.

If you read the autobiography of Walmart’s founder, Sam Walton, for instance, you’ll hear how important computers were as that company developed. It would have been nearly impossible for Walmart to develop the interlocking distribution network that helps cut costs without embracing technology.

But looking backwards can also get us into trouble.

Although Walmart is a great example of company longevity and success (how about dividend-adjusted gains above 250,000% since the early 1970s?), it’s also a good example of how great businesses can get disrupted. The competition with Amazon is nothing new, but it’s impossible to consider the future of Walmart without considering what Amazon and e-commerce means to it.

So what do we do? Invest in the bleeding edge of technology?

I don’t think that’s the answer either.

I think the “right” answer lies where so many right answers lie – in the middle. We should stay awake and aware of how the world is changing. Some companies will maintain their competitive moats even as the world changes – some may even deepen their moats by leveraging new technologies.

In the meantime, it’s helpful to learn about new technologies. It can help us understand what that means to existing businesses. But we don’t have to invest in companies at Day 1 to be successful. Motley Fool co-founder, David Gardner, first bought Amazon.com  (NASDAQ: AMZN) in late 1997 at a little over US$3 (split-adjusted). By the time the Motley Fool Singapore recommended in February last year, the stock was over US$850. To say that we were late to the game sounds like an understatement — but today, Amazon shares are trading at over US$1,710 or over 100% from where we recommended the stock.

If you like, think about technological change like the weather. When it rains, it happens whether you like it or not, so you might as well think about the great things that rain is doing and embrace that (the grass is getting watered!).

When new technologies are developed, why not look for the opportunities that they bring with them?

If you want to know which companies we think have the best chance to leverage the technologies in this changing world, be sure to check out our flagship newsletter, Stock Advisor Singapore. At Stock Advisor, we pick what we believe are the very best companies in Singapore and abroad, with the best potential to beat the market over the coming years.

So far, we’re on to something!

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A version of this article first appeared in the 20 July 2018 edition of Take Stock Singapore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on Amazon.com. Motley Fool Singapore writer Chin Hui Leong own shares in Amazon.com.