The Promise and Peril of the Coming Technological Revolutions

By Lee Bellinger / March 28, 2014

The Promise and Peril
of the Coming
Technological Revolutions

The past 150 years have seen an unceasing explosion in technological advancements. From electricity to automobiles to the Internet, our way of life has been revolutionized every generation. It is difficult to conceive of what another 150 years of high-tech breakthroughs will bring.

Nothing so far has stopped the forward march of newer and better technologies. Not wars, not economic depressions, not even repressive governments. Moore’s Law states that raw computing power (the number of transistors on a chip) doubles every two years. As long as that’s still applicable, technology will continue to progress along an exponential growth curve.

It’s like doubling a penny every day. In a month you are a millionaire.

Computers are already far superior to humans at storing and retrieving information. But computers are still far inferior when it comes to creating new information. A single computer today can “read” and store in its memory bank every word from every book in the Library of Congress. So far, however, no machine has been able to produce an original novel that anyone would want to read. That may change. Artificial intelligence that replicates human creativity is still a long way off. But it’s in development.

What will be the next major revolutionary breakthroughs to come? No one knows exactly, but some general predictions can be made based on what is now in development. Bionic limbs; cybernetic suits; artificial intelligence; carbon nano-tube elevators to outer space; biochip implants as diagnostic tools, disease fighters, and scannable personal information storehouses; genetically engineered designer babies; synthetic biology; cyborgs; the singularity when man becomes machine…and machines take over.

Human Immortality
on the Horizon?
Some Say It is on the Way

These are all on the way, at least according to some leading technophiles. Futurist and transhumanist Ray Kurzweil believes that human immortality is attainable within our lifetimes. Google is spearheading a project to try to radically prolong human lifespans.

Meanwhile Google’s head engineer claims that robots will be smarter than humans by 2029. Robots will increasingly replace humans in the workforce, economists predict. Call it human obsolescence. Perhaps one day we’ll be able to elect infallible machines to Congress instead of corruptible people!

“Quantum Computing” Could

Give Government the Power to

Pry into Virtually Anything

In the meantime, the National Security Agency is developing a “quantum computer” that would be capable of breaking nearly all existing encryption that is used to protect emails, personal files, and bank and corporate records. It’s part of an $80 million research program called “Penetrating Hard Targets.”

According to the Washington Post, “The basic principle underlying quantum computing is known as ‘quantum superposition,’ the idea that an object simultaneously exists in all states. A classical computer uses binary bits, which are either zeroes or ones. A quantum computer uses quantum bits, or qubits, which are simultaneously zero and one.” These mind-bending new applications of computing technology have the potential to spark beneficial breakthroughs in medicine, robotics, and other areas. They also come with dangers – not the least of which is the concentration of unprecedented surveillance capability in the hands of Big Brother. Anything that depends on encryption – whether it’s computer files, encrypted calls, or digital cryptocurrencies – may not be as secure as you think.

Investing Opportunities for the
High-Tech Future that’s Coming

Technology cycles create enormous booms for investors – as well as busts that follow from euphoria-fueled overvaluation. The Internet boom and bust from the late 1990s into the early 2000s is an arch example. But the Internet itself wasn’t a bust. Those who invested in quality dot-com stocks such as Amazon.com (AMZN) are doing quite well today. The biotechnology boom of the past couple years may result in a bust – though at present, biotech valuations are not as extreme as at the peak in 2000 for Internet stocks. Regardless, biotech is going to be at the forefront of the ongoing technology mega-trend in the years ahead. But now just isn’t an opportune time to be entering the sector as an investor – after the herd has already piled in.

More obscure, less frothy areas of the technology sector (like nanotechnology, for example) may offer investors more upside from here.

The next technology revolution will make companies like Apple and Microsoft look like dinosaurs unless they adapt. However, these tech giants continue to dominate the major technology indexes for the time being.

Apple (AAPL) alone is 12% of the NASDAQ 100. Apple has led technology higher since the market bottom in 2009. Perhaps it will continue to do so, but it cannot possibly sustain the same lofty rates of growth indefinitely. There aren’t enough people left in the world who don’t already own iPhones (or cheaper models available from competitors that perform essentially the same functions).

You probably won’t get Apple-like returns from Apple going forward. You’ll get them from smaller companies whose products haven’t yet saturated the market. That’s why technology investors should consider something like Guggenheim S&P 500 Equal Weight Technology (RYT), an ETF that holds 65 tech stocks in equal weightings so that portfolio performance isn’t heavily reliant on the few biggest
companies.

The stock market overall is in overvalued territory, so I wouldn’t chase this instrument on further rallies. It would be preferable to enter the technology sector on a significant pullback, which we may get later this year.

Niche high-tech subsectors that haven’t received much attention from investors are more interesting at this point in time. Nanotechnology is a term that’s going to come into increasingly widespread use. This is a truly futuristic area in which to invest. invest. Unfortunately, a promising nanotechnology exchange-traded product, PowerShares Lux Nanotech (PXN),was shut down in February. It apparently didn’t attract enough investor interest.

Its top five holdings were:

  • Arrowhead Research (ARWR)
  • Flamel Technologies (FLML)
  • Ballard Power Systems (BLDP)
  • Hydrogenics Corporation (HYGS)
  • BioDelivery Sciences International (BDS)

Not exactly household names. But just as the Internet revolution turned a few companies that no one had heard of into household names, so will the nanotechnology, biotechnology, genomics, and robotics revolutions in the years ahead.