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Do you want to make a lot of money on a next-generation technology?
Then you're going to want to say "yes" to the fifth question in our series called The Six Questions that Can Make You Rich when evaluating your next technology investment.
Companies that engage in next-generation technologies with a wide scale of development have provided investors with some of the highest returns on investment over the past 10 years. And that isn't going to change as we move into the second half of this decade.
Yesterday, we discussed how companies are capable of harnessing other technological innovations in order to make their products unique, successful, and most of all profitable.
Also yesterday a lot of new buzz emerged on Amazon's integration with Facebook to create Amazon Gift. By harnessing Facebook's messaging and data mining capabilities, the new service will allow users to send gifts to friends through its online shopping and delivery portals.
Today we want to explore the fifth question of successful technology investing.
Is this technology vital and practical to the lives of billions around the world?
If you can answer yes this question, you may have found the next great in-demand technology to sweep the globe in just a few years.
Hey, Everybody Needs [Insert Catchy Investment Idea]
We've all heard the cheap "fundamentals argument" when it comes to a long-term stock investment.
It begins with a story about how demand for a particular product is expected to spike in the next five to 10 years. "Hey, everybody eats pork!" has been a popular line I've heard when talking about the expected increases in pork production and the investment in a commodity ETF.
But many investors make the mistake of thinking that an investment based on a macro-economic perspective is sound because hypothetical numbers back it up.
The reality is, an investment based on these expectations fails to take even the most basic analysis of practicality for granted. In this case, we assume that diets will remain constant, technology will not lower scale costs and the basic assumption models for demand will remain unchanged over years and years.
But that's not how investment in radical innovation works when it comes to making money.
The reality is that demand for radical technology is actually parabolic, shockingly sudden, and spikes due to its functionality and practicality.
As we know, radical technology answers "yes" to our first five questions. It improves the speed and flow of physical goods, improves the speed and flow of information or capital, and is extremely cost effective while providing "more bang for your buck." It also harnesses other innovations to maximize its power and adaptability to grow its audience.
But a radical technology product must also be practical when it comes to growth and demand around the world.
For example, it must be universally adoptable, meaning that barriers such as language, culture, and nationality or locality must be low. Some countries culturally are collective, while others are individualist... but that doesn't hinder either type of culture from adopting mobile cellphones.
The practicality of owning a phone in your pocket instead of spending your days sitting beside a landline is extremely high. Globally, the importance of community and conversation are high to an improved standard of living, and as costs lower and adoptability heightens, the ownership of a cell phone becomes that much more practical every day.
Some types of technology, for example do not provide that level of opportunity for its expansion. Some social media platforms, for example, are not feasible for financial success given political limitations or speech codes in a particular nation.
Understanding the practicality of a product allows us to better assess our risk and our ability to not become swept up in the emotion of an investment idea without an understanding of a particular marketplace around the world.
But while we may not be interested in investing in a mobile service provider in a marketplace where speech may be regulated, we will be interested in the radical platform and hardware innovations that will be permitted for sale on a global scale, as mobile phone demand transcends these international concerns.
We might not invest in a country's cellphone provider, but we'll invest in the company selling the actual phones where demand is growing.
Not everyone uses Twitter. Not everyone has the finances to purchase Netflix, and not everyone is able to afford high-speed internet, all great innovations in technology over the last decade. But some innovations are more practical than others because of the way they transcend cultural norms and still allow us to capture growth as they become more cost effective over time.
It just requires our patience for big technological trends to reach that level of universal adoption on a global scale as practical products and services are integrated into societies.
Tomorrow, we'll be analyzing the final question in our six-part series. And this question will provide a broader view of how to fully understand the best ways to make money in the global technology space.
Next week, we will begin to evaluate the technologies that answer "Yes" to all six of these questions, and begin to assess the companies poised for immense growth over the next decade in this technology space due to radical innovation.
To follow this series from the start, here's the first installment of The Six Questions that Can Make You Rich