In a world of accelerating disruption where technology as enabler allows a person to build a billion-dollar business from their parent’s basement even the most established business models are no longer secure. The disruptors quickly become the incumbents at risk of disruption themselves, think WhatsApp, Google, Airbnb, Netflix and Uber as examples of businesses we now cannot live without.
As an investor you must question whether the business you are investing will still be around in 5, 10 or 20 years and this applies equally to both the newcomer start-up and / or established brand, which you have grown-up with.
If I had to choose a word to describe the next decade it would be “disruption” and for investors this requires a rethink on how we invest. The problem is our brains are constrained by a linear thought process whereas technological advances and the application thereof is exponential by nature and therefore we cannot truly grasp the extent of the advances we are likely to see in our lifetimes.
When I say a rethink of how we invest, I am not saying we should all be investing in Cryptocurrency or chasing the next big thing. Investing remains the one science, which fails to learn from the past. The price you pay is the single most influential factor of your future returns and the danger for investors remains overpaying for the all exciting investment stories.
The challenge for modern day investors is managing our response to the investment “noise”, which appears to be magnified by a factor 10 and therein lies the opportunity and / or threat to our financial well-being. My concern is we still rely on an instinctive evolutionary thought process, which traps us into the same behaviour bias of the past. Simply put, we continue to buy high and sell low when we know the opposite to be true. We cannot help ourselves we are emotional beings.
The emotional aspect of investing is probably why robo-advise as a disruptor of financial advice has struggled to gain traction and is unlikely to do so. It is all about trust at the end of day and how do you trust a robot.
Mcomm, CFP®, HdipTax
T. 021-851 3746