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Breaking Weekly Digital Gridlock #32: Investing in Innovation

Weekly FinTech Tip: Invest Strategically in Innovative Technologies That Will Guarantee Growth for Your Institution

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What do you need to look for when you’re investing in innovative technology?

Recently, a friend called me and said, “I read your book and I loved it. I love that you showed us how to identify revolutionary versus evolutionary technology”. Evolution is, of course, gradual change. Something that takes a lot of time. In technology, it usually means that someone has taken an idea and adapted it to work better. Or, they’ve taken an idea and figured out how to scale it. A revolution occurs when technology fundamentally changes how people do business.

However, he also asked me, “What do I look for when I’m specifically investing in innovation?” My first tip is to revisit my video, “Evolutionary vs. Revolutionary”, because that’s where your starting point is. You need to understand scale, you need to understand whether or not it’s innovative to begin with, whether it has utility, etc. You need to go back and take a look at that. That’s a starting point. But now, let’s go deeper.

If you’re buying a product or service to fill a gap, you have a very specific need. That may rely on smaller technology, it may be necessary in order to fill that need. If you’re investing in innovation, or an innovative company, or an innovative product, because you want to put some money or dollars into that area to grow strategically, then that’s different, and these are the things that you can look for when you’re investing in something strategically from an innovation standpoint, not from filling a gap or a primary need. What specific technology does the innovation rely on? What I’m saying is, I would look for these company’s products, and I would look at the underpinnings of those products. How are they achieving the efficiency, the novelty, the utility that they’re bringing to the table with whatever product they have? And I would look to see what the underlying technologies are.

The first technology I would look for – and again, this is not a limited list, just the things I’m thinking of right now – is machine learning and artificial intelligence. Products that are built upon these new technologies that are leveraging artificial intelligence and machine learning are going to have a lot of legs and they’re going to have a lot of value. That means that the company invested in this technology, which means they’re going to go a long way. So, again, if the underlying technology uses machine learning or artificial intelligence, that would be a check in the positive column for me.

Distributed ledger technology is going to grow exponentially over the next five years. We’ve already seen J.P. Morgan invest in it. Now we’ve seen Facebook Libra. We’re going to see more of these things down the road, and if the underlying technology is using this distributed ledger platform – and I’m not talking about a cryptocurrency specifically. I’m talking about things like smart contracts. I’m talking about things like decentralized storage and advanced cryptology. Then you’re probably looking at a future platform.

This one’s a little out there, but it’s going to come faster than you think. Quantum computing. Now, for those of you that don’t know what quantum computing is, I’m not going to attempt to explain it in this particular video. I would encourage you to go check out my podcast with Roger Grimes, where we go deep into quantum computing and what it means for the future. It’s one of those things that just makes your mind go, “Poof”. Its thought right now that we are only a few months away from what they call “quantum supremacy”. What does this mean? Well, first of all, it’s not good in some ways. It’ll mean that most of our cryptology can be broken. It can be broken into pieces, and once they look into it and they can get all the information out of it, they’ll be able to just do it in seconds. Things that would take modern day computers right now years upon years upon years, can be done in less than a second by these quantum computers. That’s why you have all of the governments of the world working on this so hard, as well as the big players like Google, Facebook, IBM, Microsoft, etc. All of these folks are looking into this. However, there is quantum technology available right now. For instance, there’s a company called D-Wave. Quantum technology has a very specific application. One of those applications is going down a lot of paths at the same time and dealing with abnormalities and frequent changes in markets. If I saw a company that was investing in quantum computing as their underlying platform to provide a service or product to me, I would be very interested in what they’re doing. Again, quantum computing is a check in the positive side for me.

To recap:

  • Machine Learning and Artificial Intelligence: if you’ve got a product that’s based on that, I think that’s pretty valuable.
  • Distributed Ledger Technology: if you have a product or service based on a distributed ledger technology, I think that will have legs as well.
  • Quantum Computing: if you have a product based on quantum computing, you’re really far out to the future. Again, that’s a bet I might make right now because I believe that technology will be a game changer. It’ll be like investing in the Internet in 1989 or ’90. That’s going to be a very big catalyst for change in the entire world.

So to close out, these are just a few things to take a look at. There are a lot of other things to check out. Just make sure that the technology is not built on old infrastructure, older services, or maybe just taking advantage of a regulatory loophole. Things that won’t last a long time.

Thank you for taking the time to listen to this FinTech Tip. If you are interested in learning more about quantum computing, our podcasts with Roger Grimes are available on big-fintech.com and several podcast platforms. Subscribe to our channel using the link below for notifications whenever we post new videos, and we’ll see you back here next week!

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