Investing in Technology
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Investing in Technology: A Brief Guide to its Evolution

The technology of tomorrow points us towards a smart, automated, robotic world. Artificial intelligence has brought innovation to virtually every sector in the economy. Investment opportunities in technology have been growing rapidly and are finally ready to go mainstream. 

The modern world has its roots in the Industrial Revolution that began in Great Britain in the late 18th century.1 The technological advances of this period established the ground on which all subsequent developments were built.

The Industrial Revolution marked the start of a period of rapid technological change, which continued through the 18th and into the 19th century. Out went hand production processes and in came machine manufacturing. In came factories and production lines. Steam and water power replaced horses and donkeys. A little later, in came the telephone, and electricity culminating in automation and artificial intelligence.

After the Industrial Revolution – The Road to Automation

The respected technology scholar Carlota Perez identifies four major technology shifts after the Industrial Revolution: the Age of Steam and Railways (1829); the Age of Steel, Electricity and Heavy Engineering (1875); the Age of Oil, the Automobile and Mass Production (1908); and the Age of Information and Telecommunications (1971).2

Today, the “post-industrial” economy depends less on manufacturing and more on services that combine human capital – knowledge and skills – with technology. As factories are progressively replaced with offices, blue collar jobs are declining in number, replaced by more skilled white collar jobs. To support the new knowledge economy, education levels are improving across the board.

In the UK, the first industrialized country in the world, the manufacturing sector accounted for 48% of the UK economy in 1948. By 2014 it had dwindled to a mere 14%. Services, in contrast, rose from 46% to 79%.3 The rest of the G7 group of nations has seen similar changes in the makeup of their respective economies.

Most recently, technological change has brought innovation to virtually every sector in the economy. The music, airline, and newspaper industries have all undergone seismic changes. Advances in finance technology are making financial services more efficient. Even education has been disrupted. Massive Open Online Courses (MOOCs) are driving the proliferation of distance learning.

Then there is “big data” – massive sets of data that can be analyzed by sophisticated computer programs to identify trends, traits and patterns, giving companies and governments information on human social behavior that can help them decide the direction of business and policy for the future.

The manufacturing industry continues to evolve as robotics and automation gradually replace human workers. In the last five years, 75% of smaller manufacturers and 97% of larger manufacturers have invested in some kind of automation.4

What will drive future technological shifts?

Around the world, an unprecedented demographic shift is underway. The proportion of elderly in the population is rising as birth rates fall and longevity rises. There will be a growing need for home automation systems, and for new medical and transport technologies, to address the needs of an older population. Automation of elderly care is growing in prominence, and nowhere more so than Japan, where the demographic shift is most pronounced.

Two particular technological advances, the Internet of Things (IoT) and Artificial Intelligence (AI), are set to have an enormous impact on society.

Common, everyday objects will be powered by AI and linked together over the internet into something resembling a hive mind – the IoT. Sharing of data by the linked objects will allow them to become “smart”, acting proactively and responsively to human signals. We are already seeing fundamental changes in the way we work driven by smart organizational tools that time and manage human activity. In the future, Artificial Intelligence and the Internet of Things seem likely to transform the way we live.

Smart fridges will tell us when we need more food. Smart home heating will regulate temperature based on our behavioral patterns or the weather. We will rely on robots to grow food, look after our elderly and our children, and perform delicate surgical operations beyond our capability. AI will manage our transport systems, monitor our health, maintain our social networks. 

The final word

Automobiles were scorned by many, thought never to have a hope of replacing the horse as the principal means of transport. More recently, the same was true of the television, microwave ovens, mobile phones, personal computers and the internet.

The technology of tomorrow points us towards a smart, automated, robotic world. This is the investment trend that has been growing rapidly in recent years and is finally ready to go mainstream.

And it all began with the Industrial Revolution, over two hundred years ago.