Disruptive technologies and investments

Disruption is difficult to pinpoint in technology and in general. Usually if disruption is recognized by the masses there is an opportunity for rapid growth and expansion for the companies in the space. This is true for private and public companies and some examples of both private & public companies include Twitter, Tesla, Groupon, AirBNB, & LuluLemon.

Finding those disruptive things early is what makes early stage investing highly successful – it is also what makes momentum based investing highly successful. For example a colleague of mine who has a day job told me they made nearly $100k recently on Tesla’s growth. Incredibly amazing profits that most of us in retrospect can see why they made so much and how obvious it is that the growth would be so rapid. In the moment though – most of us were thinking that the valuation of Tesla was ridiculous and refrained from risking any of our money in the Tesla bubble.

This isn’t a post about trading or profiting though – it is a post about disruptive technologies and investments. Finding areas where there is disruption is an important thing and there are a few ways to find those disruptions. One way is to simply follow the sharks in the water – they spend a lot of time looking for the best fish to eat and if the sharks are looking for disruptive fish… well the odds of finding those fish are pretty good.

Not that I am a reader or even a fan, but ZeroHedge recently put up Goldman Sachs’ (one of the best sharks in the water) eight disruptive themes. I have them posted here along with some companies that are examples of the companies in those spaces – I’m not saying Goldman or you should invest in the companies, I put them there as representations of those industries).

• E-cigarettes – The potential to transform the tobacco industry (Blu Cigs – Lorillard $LO)
• Cancer Immunotherapy – The future of cancer treatment? (OncoSec $ONCS or Celldex $CLDX)
• LED Lighting – A large, early-stage and multi-decade opportunity (public Cree $CREE or Orion $OESX)
• Alternative Capital – Rise of a new asset class means growing risk for reinsurers (short reinsurers like Berkshire)
• Natural Gas Engines – Attractive economics drive strong, long-term penetration (pubic Westport $WPRT)
• Software Defined Networking (SDN) – Re-inventing networking for the cloud era (public – most any networking company $CSCO, $FFIV, etc.)
• 3D Printing – Disruption materializing (public Stratasys $SSYS)
• Big Data – Solutions trying to keep up with explosive data growth and complexity (public Tableau $DATA)

Beyond following the sharks to public trends, there is looking at private and early stage companies. For these investors look at two things – new ideas & old ideas applied in interesting ways. For example:

• AirBNB for ______ <- this is a popular theme because social sharing of physical goods is a popular trend (Lyft for example)
• What would improve mobile monetization <- this is tough as it is broad, but there is no question mobile screens are attracting customer attention
• Financial planning <- on the trail of Mint’s success, what daily financial help do consumers need (TruBalance for example)

I may take some positions in the companies above before or after this is published…