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About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #60 – Unstoppable Forces – Profiting from Future Tech That’s Already Here
It’s the year 2030. You’re sitting in your kitchen, and after a brief discussion with your spouse of what’s for dinner tonight, you both decide you’ve had a long day and you’d like to dine out. You’ve both had a couple of cocktails, and you’d like to have a couple more at dinner. It’s been that kind of day. You grab your smart phone, tap an app, type in the name of the restaurant, and within 5 minutes a driverless car is in your driveway. Within 5 years, the government has announced that driving will be illegal. Humans are just too dangerous behind the wheel compared to automobile, AI driven cars. You’re statistically 10x greater to result in a deadly crash. After billions and billions of miles of extremely low accident driverless data, the conclusion is clear – humans can no longer be trusted behind the wheel.
The next day, you have your annual DNA sequencing appointment. Just a couple of decades ago, this procedure would have set you back $2.7 billion. Now it’s just a 100 bucks. The AI driven machine will scan your body and look for any potential defects in your DNA sequence. It will pick up on anything that looks off and alert you. Nothing is wrong yet, but the machine is flashing a red warning light. There appears to be a change in your genetic code from your visit a year ago. What the heck happened, you ask yourself. Well, you were under quite a bit of stress this past year. That has to be it. Something is developing in your body that in the future could develop into something more serious. So the machine kicks out the probability of this developing into more serious illness down the line. 47%, it says. Do you want to fix this now?
You click yes, as that’s too high of a probability, and within minutes, the gene editing machine goes to work and fixes the issue. Presto. No chance of that developing into cancer. You checkout paying with your favorite cryptocurrency, click on your home address in the driverless app, walk out the front door to the clinic, and you’re back home within minutes.
Later that evening, you realize you haven’t talked to your Grandmother in a while. She’s approaching 100, and although she will likely live to be 125 with todays life expectancy rates, it wasn’t that long ago where 100 was very rare. Being that you haven’t seen her for a couple months, you decide to request a hologram call instead of the phone. Just like you would attempt to FaceTime, you hit the Hologram option and she accepts. Your dear Grandmother is in your living room, although her physical body is several hundred miles away.
You catch up on life and have a great conversation. She’s having incredible success with microdosing psychedelics, you know, the stuff from the magic mushrooms that used to be highly illegal and classified at that same level as acid and other highly dangerous and illegal drugs. It’s done wonders for her depression and anxiety. In fact, the depression pills she used to take actually did more harm than good. She tells you she can’t believe that natural plant based therapies have been here right in front of us all along, but misunderstood, banned and deemed illegal by our federal government. Before you “hang up,” she again reminds you what a great move you made to mine Bitcoin all those years ago: it’s now worth $500,000 per coin. The coins you mined and held have created enough wealth that you couldn’t possibly spend it all even if you tried. Lucky kids when they someday get it. You need a Bitcoin Grandma? you ask her in all seriousness. You have plenty and Grandma is living longer than even she planned for.
This seemingly “fictional” future that I just described, sounds like something out of a science fiction movie. But I can assure you that none of it is fictional – because these things are already here! (with the exception of Bitcoin at $500k per coin, although that has a very high probability based on supply/demand). I wasn’t describing anything that doesn’t already exist. It just hasn’t made it’s way into the mainstream, everyday life of us typical Americans. But it will. It’s just a matter of time.
Over the next 10 years, the advances in technology will bring such fundamental changes to our lives, they’ll make all the progress we’ve made since the great tech revolution that started in the late 1990’s pale in comparison. Everything will change. The ways in which we work, shop, sleep, eat, travel, bank, communicate, entertain ourselves, conduct warfare, and maintain our health will be drastically different. Although we’ve seen big changes in technology during the last two decades – streaming video, smart phones 100,000 times more powerful than the NASA computers sending the astronauts to the moon, the internet, driverless tech – these are only incremental.
They are just setting the stage for advances that will be exponential. Computing power will surpass human brain power, and AI (Artificial Intelligence) will be everywhere. Millions of self driving autonomous vehicles will flood our highways, saving lives, gasoline, reducing traffic, car insurance costs, and freeing up time. DNA sequencing, which can now be done for less than $1,000, will soon cost less than $100, opening the door for new preventative and personalized medicine. The average human lifespan for anyone born in the last 20 years will exceed 100 years. Nearly everyone on the planet will have smartphones and access to high speed wireless networks through global satellite networks. 3-D printers will be in every home, enabling consumers to buy and instantly create thousands of products. If you thought Amazon Prime was fast, wait until you turn on your 3-D printer and watch it make your product in 10 minutes.
The only way to access these types of companies is through the stock market or pre-IPO’s like I previously described. Let’s think about why we would want to invest into smaller early stage companies. Investors typically place a company in one of three size categories: Large caps, Mid-caps, and Small caps. “Cap” is short for “market capitalization.” This is the term used to describe the value of a public company. For example, the popular software company Microsoft is a large cap. In 2018, its market cap was around $700 billion.
Typically, companies with market caps in between $2 billion and $10 billion are said to be mid-caps. The difference between a large cap and a mid-cap can be huge. A mid-cap company worth $5 billion is less than 1% of the size of giant Microsoft.
Finally, we have small caps. These are companies with market caps under $2 billion. While the difference between a mid-cap and a large cap can be huge, the difference between a small cap and a large cap can be incredible.
For example, take a small cap with a market value of $500 million. This is just 10% of a mid-cap with a market value of $5 billion… which means it is less than one tenth of one percent the size of a large cap like Microsoft.
Large caps can be good investments. They are typically stable, established, profitable companies. They often pay dividends. Large caps can be great investments for conservative investors.
But if you’re interested in making 10, 20, even 50 times your money (or 734 times your money like in Netflix) in a single investment, you’d be smart to look at small cap stocks. Small companies have much greater potential to produce giant returns for their shareholders in a short time than any other kind of company. The reason small caps can generate giant gains in a relatively short time is simple…
It’s much, much easier for a young, $500-million small cap to grow 10-fold than it is for a mature $500-billion giant to grow 10-fold. The small cap is operating from a much smaller base… and the giant’s “super growth” days are behind it.
*When a small $100 software company creates an amazing new way to collect, manage, and analyze important information like health care data, financial data, or marketing data, it can increase revenue by over $1 billion and its stock can soar 10-fold. However, if giant Microsoft adds $1 billion to its $100 billion+ annual revenue, it’s a drop in the bucket that won’t even make the news.
Wall Street is not fishing in these ponds yet. Most institutional (very large funds) are just too big to invest into these small companies. They have too much capital to deploy, making smaller companies too difficult to effectively buy because they could buy up half the company and be vastly overweighted in their ownership and risk percentage. These small companies have huge potential for disruption, along with huge potential returns. The risk is that they will likely have quite a bit of volatility, as any investment that is still early in the game has like what we are seeing in the crypto markets. You also have the possibility that you can create a powerful technology, but then get disrupted by someone else that comes along and does it bigger, better, and faster.
The challenge you will have with buying small cap tech size stocks is that when you buy them, they could instantly drop in price. These types of stocks have quick swings in price action, and timing the bottom is all but impossible. You have to go into this type of investing with the mindset that you don’t care what happens in the short run. You are making a 5 year at minimum play – you’ll hold on for dear life and let the technology develop and take hold in the market. If you buy these stocks and check your brokerage account every day, you’ll be pretty miserable. This type of investing is best done with buy it and forget it type mentality.