We’re in the middle of one of the greatest transformations in history, much like the Industrial Revolution, except infinitely faster. The mobile internet wave, with over a billion people connected through their smartphones has made a lot of people a lot of money. Almost all of us own a smartphone and think how necessary it is to your life. But then think there was no such thing until Apple invented it seven years ago. Now a lot of smart investors are looking past the smartphone asking what’s next. And the answer for a great percentage of them is the “Internet of Things,” or IoT for short.
The IoT describes a future where every day physical objects will be connected to the Internet and be able to identify themselves to other devices. When objects can represent themselves digitally, they become greater than the object itself. They don’t just relate to you, but to surrounding objects and a database as well. Objects’ acting in unison is known as “Ambient Intelligence.”
On the Internet of Things, devices large and small will be imbued with processing power and connected to one another, allowing them to share data and in some circumstances, control one another. Everything will be online, everything is monitored and everything is connected: our homes, our appliances, our financial systems, our government. Cars won’t need drivers, planes won’t need pilots wars won’t need soldiers.
Granted, some of this is a little creepy. Things like robots and drones remind me of “The Terminator” where the machines become self-aware. And remember that the first thing they became aware of was the fact they had no need for humans at all and set about killing them. There are robots now that look just like Terminators; someone’s idea of a joke.
Already, 11 billion sensors are attached to production lines, electric grids and logistics networks in homes, offices, stores and vehicles all feeding data into the IoT. By 2020, projections are for 50 billion, and at some point, it may be a trillion. Cisco forecasts by 2022, private companies will gain $14 trillion from the IoT. GE thinks one half of the global economy will be affected by 2025.
Google proved the investment possibilities when they bought Nest, a company that manufacturers smart thermometers and smart smoke detectors (A smart thing is connected to the Internet and a dumb one isn’t) for $3.2 billion when it was valued at $2 billion.
So how should you invest in the Internet of Things? Since everything in some way will eventually be touched by technology and the Internet, the choices are myriad. The first thing that comes to mind is all the data from all the now, or soon to be, connected things have to be stored somewhere and analyzed. The second thing I thought about is how secure is the whole thing. Just like the Internet itself, it was conceived and built long before security was in place. Security for the IoT is woefully lacking, so a company like Wind River that is a leader may be worth consideration.
Cloud Computing is a term like “Smart”, made up by someone to sound important. There isn’t any cloud, in fact, the term doesn’t even make that much sense. A cloud is simply a server farm, a bunch of computers somewhere to store all the data they can fit into their computers for a price. But there’s a lot of data these days, thus the term “Big Data”, describing the exponential growth and availability the data. Big data may be as important to business, and in turn society, as the Internet.
Who’s going to build the infrastructure? Back in the telecom boom in the 1990’s the winners were manufacturers of fiber optic cable and components. The IoT infrastructure requires Wi-Fi networks, processor chips and sensors. Goldman Sachs, who is on top of research in this area, thinks companies like Cisco and Qualcomm will be leaders.
Who are the manufacturers of connected devices? Consumers are willing to pay a premium for connected devices so as an investor it behooves you to look for manufacturers that have a clear IoT strategy as part of their planning.
Who’s selling all these devices? Over the next five years the Internet of Things will dramatically shape the products we use and the retailers who sell them. We’re at a new innovate or die moment. If retailers can’t offer connected products, they might go the way of the dinosaur.
Until the next time, we’ll watch your money.
Nick Bertell is a chartered financial consultant. These are the views of Redwood Coast Financial Partners, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice. Redwood Coast Financial Partners, an independent firm with securities offered through Summit Brokerage Services, Inc., Member FINRA/SIPC. Advisory services, offered through Summit Financial Group, Inc., a Registered Investment Advisor.