When Ray Harroun came out of retirement in 1911 to race in the first Indianapolis 500, he made one request: He wanted to ditch the ride-along mechanic that the rules required in order to save weight and give his yellow Marmon Wasp a racing edge.
The Indy organizers balked: The mechanic provided a big measure of safety, they said, acting as a spotter who could watch for cars behind or on either side of the racer.
Harroun bolted a mirror to a bracket on his dashboard, was permitted to race without a mechanic, and won the inaugural Indy race – leading 88 of the 200 laps, the most of anyone.
And the rear-view mirror that Harroun used to gain an advantage in a car race? It’s now standard safety equipment on motor vehicles of all types – meaning it occupies the ranks of devices or substances that were designed to solve one problem, but were later found to solve others just as well.
Today I’m going to share a similar story, and show you how a fluid developed to keep aircraft parts clean or suppress fires is being used to solve one of the biggest computer problems we face today.
And I’m even going to show you how to make money from it.
In the Age of the Internet, the invention of a high-powered computer known as a “server” is one of the things that have allowed our tech-oriented society to survive and thrive.
In a nod to our country’s agrarian roots, these servers are packed into huge buildings, organized in neat rows just like the corn on a Midwest farm. They’re called “server farms.”
But that’s where the agrarian similarity ends.
You see, as electronic circuits keep getting smaller, they make each server used for the Web and private computer networks much more powerful. But technology is just like finance in that there’s no free lunch: This escalation in power and reduction in size creates a big problem.
I’m talking about heat.
These servers run very hot. And that, in turn, increases the odds of a server “meltdown,” meaning the box just gets fried and becomes useless.
Right now, server farms rely on two main cooling sources.
The first is high-speed electric fans that blow air over the devices.
The second is executed by pumping lots of cold air into these huge rooms.
Trust me, you wouldn’t want to have to pay the electricity bill for one of these facilities: Experts estimate that the U.S. alone spends roughly $7.4 billion a year cooling data centers.
Now you understand one of the key financial drains with all these server farms sprouting up all over the world.
But here’s the thing: With every problem that needs solving, there’s also a profit opportunity for the organization that devises the solution.
Don’t scoff. Liquids and sensitive electronic gear usually work together like a baseball and your neighbor’s living-room window. But Iceotope has found a way for an alcohol-based chemical to keep all those circuits running cool -without the liquid damaging the complex electronic gear.
To achieve its results, the U.K.-based firm partnered with industry giant 3M Co. (NYSE: MMM). That big-cap leader has sold its Novec Engineered Fluid for at least two decades.
Because it isn’t water-based – meaning it doesn’t cause oxidation (rust) or other types of corrosion – the substance is often used by the military and aerospace firms as a parts cleaner. It also works great as a fire suppressant in rooms full of electronics because use of a water-based product there could ruin millions of dollars’ worth of sensitive equipment.
But using it as a liquid cooling agent for computer centers is indeed a novel use of this substance. As such, I see this as just one more example of how we have entered what I call the “Golden Age of Materials Sciences.”
If we’re to maintain the rapid pace of innovation we’ve been experiencing, we have to keep finding new materials that can solve complex problems.
Or come up with unique new twists for already-existing chemicals.
That’s why I think Iceotope is really onto something here. The result is a system that offers huge efficiencies.
Really, the stats are off the charts. Consider that Iceotope says its approach lowers data-center-cooling costs by 97%. That’s pretty close to getting it down to free.
But that’s not all – the firm says its approach lowers overall infrastructure costs for these centers by half and reduces the overall power load by 20%.
And the cooling system is only part of Iceotope’s innovative package. There’s also the “platform” itself. And it’s pretty simple, combining a computer cabinet with a server module.
In turn, those modules can be set up for dedicated computing, or for telecommunications needs.
Iceotope is after two main markets. First, the cabinets can be designed as supercomputers. Those machines are used for such Big Data applications as searching through social networks, looking for the origins of the universe and catching terrorists before they strike.
Second, the boxes tap another major trend – cloud computing. That’s because they can be wired into a series of server racks that comprise a full data center. This is a real growth area because hundreds of millions of mobile devices need to access the cloud for data, video and more.
So, Iceotope has great science, access to one of the world’s top materials companies, and a couple of major tech trends going for it.
But it’s also a private company, meaning it has yet to issue its stock to the public.
But don’t worry about that – there are actually four ways to profit from this new field of “liquid-cooled computing.”
First, there’s 3M. The mega cap firm likely won’t get a lot of sales from the Iceotope solution at this point.
But the breakthrough shows the firm can still remain on the leading edge of high tech at a time when materials science is so vital.
For its computer modules, Iceotope is working with Intel Corp. (NasdaqGS: INTC) and its arch rival – Advanced Micro Devices Inc. (NasdaqGS: AMD).
These two chipmakers couldn’t be more different. Intel has a market cap of $107 billion, compared to $1.9 billion for AMD. Intel is clearly the more stable of the two firms.
In the past, I have described AMD’s stock as a “bottom-feeder’s dream.” Trading at $2.60 a share, it’s a risky play suited for aggressive investors.
Let me close by telling you about one other firm partnering with Iceotope. It’s Super Micro Computer Inc. (NasdaqGS: SMCI), a maker of high-performance servers.
With a market cap of about $490 million, Super Micro trades at 10 times forward earnings and just 0.45 times sales at its recent share price of roughly $11.60.
With a consensus target of $15 – about 30% above where Super Micro is trading now – analysts seem to like the shares of this maker of energy-efficient computer servers.
It’s impossible for me to predict at this point which of these stocks will have the best performance over the next couple of years.
But this much is certain. Liquid-cooled computing is an exciting new field that could have a dramatic impact on the entire field of computing, an area that touches just about every part of our lives today.
And just as Ray Harroun had no idea how much his invention would change the world that day in Indianapolis, there’s no telling what other innovations this new data-farm technology will spawn.
Just know that when those innovations do appear, we’ll be here to show you the best ways to profit.
When you peruse the tech-dominated headlines these days, a lot of the talk is about how smartphones and tablets are taking over for notebooks and laptops – which had taken over for desktop PCs.
But with the confusing mix of keyboards, track pads, touch-screens, and even voice and gesture commands that are in use today, there are at least as many different ways to interact with all those computing devices as there are different devices themselves.
But Intel Corp. (NasdaqGS: INTC) is pioneering a new type of technology the chip-giant says will bring order to this interface confusion.
And it refers to this invention as “perceptual computing.”
No doubt, this is Intel’s latest attempt to regain its relevance in a world that is going mobile at an accelerating rate – a transition that has transformed the once-dominant firm into a veritable also-ran. And most of these earlier attempts amounted to almost nothing at all.
But I believe perceptual computing is different – and, in fact, could have two important results.
First, it could bring about a major change in how we interact with our computers and mobile devices.
And, second, it could put Intel back in a position of some prominence in the high-tech realm.
You see, Intel says perceptual computing represents a new kind of interface that will let users switch easily among the afore-mentioned keyboards, track pads, touch screens, voice commands, and gestures. More to the point, users could interact in several different modes at once.
In that regard, it’s more like Web-based cloud computing. It’s technologically agnostic … and doesn’t matter what platform you use. Perceptual computing is designed to take it all in.
Here’s how Intel’s strategist and product manager Barry Solomon described it for the prestigious online journal MIT Technology Review:
“We’re not trying to replace anything. We’re just trying to augment existing modes of interaction. We’re adding senses to the computer’s brain so it can perceive its surroundings, [see] who’s interacting with it, and make those interactions more intuitive.
“We want to go beyond simply delivering technology. The tech world has morphed into delivering experiences.”
Several trade journals that have looked at the Intel system have compared it to the “gesture computing” employed in the sci-fi action flick Minority Report, or even to something out of Star Trek.
That’s why this is important technology for the Era of Radical Change.
Right now, the Intel system requires users to clip a 3D video camera to their laptops or PCs. So, Intel is working with Creative Technology Ltd.(OTC: CREAF), which supplies a camera for about $150.
With the Creative Tech camera, the new platform will be able to sense gestures being made between six and 36 inches away from the lens. The camera is slated for sale later this year, but Intel wants developers to start writing applications now, so it’s inviting those folks to buy the camera and get right to work.
Intel is quick to point out that the add-on camera is just a bridge technology. As new Intel-powered laptops come on the market, they will be delivered with this tracking technology built right in.
For advanced-voice recognition that covers nine different languages, the chipmaker is working with Nuance Communications Inc. (NasdaqGS: NUAN). Nuance is best known as the force behind Siri, the voice-activated personal assistant inside iPhones from Apple Inc. (NasdaqGS: AAPL).
Other built-in features will include a voice assist that makes it easier to post news and updates to social-networking sites, search Wikipedia and, of course, to control videogames.
Intel first described its new approach last fall at a developer’s conference in San Francisco. It actually unveiled the system at last month’s Consumer Electronics Show in Las Vegas, which gave the Silicon Valley giant a ton of buzz.
Based on my decades of tracking high-tech breakthroughs, I predict Intel’s new platform will launch with quite a few quirks. Early versions either contain bugs that will need to be fixed, or just won’t perform up to expectations.
But that’s just the nature of the beast. What’s really important here is that I believe that Intel is breaking new ground. And that means the world’s No. 1 maker of semiconductors – long a tech laggard – could become one of those most intriguing turnaround plays in all of technology.
For those of you who prefer to invest in smaller tech concerns … don’t worry: I see plenty of opportunities like that still to come.
I already mentioned two small-cap tech players already working with Intel.
And you can bet that other fast-growing firms will jump to the fore, creating profits … perhaps even of the magnitude that Intel itself generated in its early dominant days.
As those companies hit my radar, you can bet that I’ll be passing them along to you. Because that’s what we look for – here in the Era of Radical Change.
Futurist Ray Kurzweil is one of the world’s busiest people.
And that’s no surprise. A best-selling author and subject of a major documentary, Kurzweil has an unmatched talent for explaining how cutting-edge technology is going to change our lives. That means this “A-list” speaker is always on the go, traveling the globe as he spreads his futurist technology gospel.
That’s why I made sure to buttonhole Kurzweil at the recent Singularity Summit technology conference. As he headed into the San Francisco lecture hall to share the newest insights into how the brain works, I was able to walk along with him and have a quick chat.
As we talked, little did I know that Kurzweil was working on something that would stun the tech world in a manner that’s usually reserved for one of his predictions.
Kurzweil, as it turned out, had accepted a major position at none other than Google Inc. (NasdaqGS: GOOG), the Web giant that is to search what the tech futurist is to prognostication.
And Monday was Kurzweil’s first day on the job as the company’s new Director of Engineering.
A lot of investors have glossed over this news. That’s a big mistake. As I see it, this single hire speaks volumes about how Google views itself, and how it intends to keep building shareholder value.
If you’re interested in Google, this is a bit of strategic intelligence that you absolutely have to know. Here’s why: With this single move, the world leader in Web search is telling investors like you that it intends to remain a growth company. This also tells us that Google wants to invent the types of technology that will change the world and make money for investors – even if it means breaking free of the Web itself.
I defy anyone to identify another leader in the tech field who will have more of an impact on the world in the Era of Radical Change. I’ve followed his career for years now and know firsthand that many of his predictions that people dismissed as crazy have actually come true.
Kurzweil began pushing the tech envelope as a teenage inventor and has literally never looked back. Along the way, he has invented dozens of new products, penned groundbreaking books on the technologies of the future, and altered our view of what is possible and even probable in the Era of Radical Change.
I can guess what the naysayers are already saying – that Kurzweil won’t fit in at Google because the company is so darn huge. Or that Google, with a market cap of $235 billion, can never recapture its free-wheeling days as an early-stage startup.
That’s high-tech balderdash.
Fact is, Google prides itself in pushing the boundaries of cutting-edge tech. For instance, I’ve told you about Google Glass, a pair of spectacles that can display maps and text messages, connect smart phone calls and capture video, among other things.
Combine that with Google’s intense focus on machine learning (as evidenced by the way it does searches) and you can clearly see how Kurzweil and Google are made for each other.
Kurzweil, 64, has stayed ahead of the curve since he was 14. That’s how old he was when he designed software that wrote original music. Later, he created the first print-to-speech reading machine for the blind.
Back in 1999, he predicted that in about a decade we would see such breakthroughs as self-driving cars and mobile phones that could answer questions posed by voice.
People criticized these predictions as “unrealistic.” Google now has both.
“It’s easy to shrug our collective shoulders as if these technologies have always been around, but we’re really on a remarkable trajectory of quickening innovation,” Kurzweil says. “Google is at the forefront of much of this development.
“I’m thrilled to be teaming up with Google to work on some of the hardest problems in computer science so we can turn the next decade’s “unrealistic’ visions into reality.”
As I see it, by heading up these kinds of projects that will lead to new sales, Kurzweil could indeed have a big – and direct – impact on Google’s future cash flow.
And the indirect benefits could be even bigger: His presence alone will act as a recruiting magnet, helping to attract the visionary engineering talent that will help create other new sources of revenue – while also blocking out threats to Google’s core business.
His name alone opens doors at tech firms and research labs around the world. If Google wants to raid talent from other companies or major universities, all Kurzweil has to do is pick up the phone.
More to the point, he is an expert in machine learning and intelligence. And that’s basically become a big part of Google’s core product. Machine learning (in which computers better “understand” human intentions) has created much more relevant Web searches that also help support ad sales.
Kurzweil has worked in this field for decades. Now that he has joined Google, he has a built-in global infrastructure that can roll out his ideas and new products on a scale he could never have achieved on his own.
This is also is a marketing coup for Google. Tech writers all over the world want to talk with Kurzweil about the radical changes coming to the human race.
Now, rather than simply making his own predictions, Kurzweil will be telling the world about “the future according to Google.”
We’ll stay on top of this story as it develops, and will keep tabs on the investment opportunities – direct and indirect – that we believe will spin out of the Kurzweil-Google betrothal.
That fact alone reminds us of a point that bears repeating here: Just because the Era of Radical Change focuses a lot on the future, that doesn’t mean it can’t help you make money today. And we’ll continue to show you how to do just that.
If you could find a way harness the speed of light – 299,792,458 meters per second – in computer processing, processors could handle massive amounts of data at mind-numbing speeds.
At the very least, it could lead to computer speeds that are up to 100 times faster than those in use today.
That’s why industry leaders have been pursuing the promise of optical computing for decades now.
Indeed, we’ve figured out how to pump light through fiber optics for super-high-speed communications in computer networks and the Web. That’s become routine today.
But still, no one could find a way to solve the challenge of focusing light in tiny spaces like computer chips. It’s a brick wall known as the “diffraction limit.” Simply stated, it means that once you get into tiny spaces – like the postage-stamp size of a semiconductor – you can no longer focus a light beam.
Until now…
Two teams of computer researchers have just announced major advances that promise to make optical computing a reality in the very near future.
One comes from a famous tech leader whose shares are publicly traded; the other out of academia. Of course, major advances in the lab often make it to market in ways that mean profits for early investors. This is one of those rare cases where a breakthrough happens at a prestigious university… and you could literally invest in the field today.
So let’s start with the breakthrough from Caltech. A team there has made a device that can focus light to a point several times smaller than the end of a human hair.
The California Institute of Technology team got around the diffraction limit by building a new “waveguide” that can channel light as though it were moving inside tiny tunnels. This is just plain brilliant. They took a material that’s much like glass and topped it with a thin layer of gold.
The result is a device built on a semiconductor using nanotech methods that are standard in industry today. Team members said this means the new device should integrate easily with current technology and could have a strong impact on at least two major fields.
First is biotech. Caltech says the device can also function as a high-res microscope that can peer inside of cells to better study disease and new drugs.
Second, it also could lead to computer memory that is 50 times larger than today’s 1,000 gigabytes per square inch.
Of course, team leader Hyuck Choo can think of one other application that could have a big impact on the world. Said Choo, “Don’t be surprised if you see a similar kind of device inside a computer you someday buy.”
And that brings us to the related news from International Business Machines Corp. (NYSE:IBM). Big Blue is turning the world on its ear with a new device that uses light to transfer data – but with a big twist.
See, IBM engineers found a way to combine optical components side-by-side with electrical circuits on a single silicon chip. This is the first time anyone has pulled this off using standard 90-nanometer chip making techniques.
They call the new process silicon nanophotonics. (Don’t let the name bother you. It’s the results we’re after.) And IBM says it could do for computer optics what transistors did for chips.
In other words, a veritable revolution.
Today, we can put billions of transistors on a single piece of silicon. This has allowed us to double computing power roughly every two years for decades. That in turn has driven the pace of innovation throughout the whole economy.
IBM’s process uses pulses of light to transfer data. Think of this as a superhighway for large volumes of information, everything from tracking hundreds of satellites to trading thousands of stocks at once. The company says the new process will move information quickly between computer chips used in servers, large data centers, and supercomputers.
“This allows us to move silicon nanophotonics technology into a real-world manufacturing environment that will have an impact across a range of applications,” said John E. Kelly, IBM’s director of research.
At this point there is no “pure play” in this area of optical computing. IBM is a huge, $216-billion-cap company with hands in almost every segment of the computing market. It made waves last year when its Watson super computer beat humans on the quiz show Jeopardy.
But once IBM opens the market, smaller companies will get into this field and give investors more chances to profit from optical computing.
I’ll keep you in the loop.
And the Era of Radical Change will continue to bring us a steady stream of innovations that will line our pockets.
With the world going through so much fast-paced change, high-tech execs need to keep their eyes clearly focused on the future.
Sadly, some are still looking in the rearview mirror.
Take the case of Intel Corp. (NasdaqGS:INTC). The world leader in PC chips has just announced it’s borrowing another $6 billion.
Of course, borrowing money isn’t necessarily a bad thing. It’s the purpose of the debt that matters most.
Here’s the thing. Intel is taking on more debt to help it buy back more of its flagging stock. See, the senior brass think that at $20 a share, this is a great value. And on paper, they’re right.
After all, Intel has strong profit margins. Not only that, but its 15% return on assets is solid. It means that for every dollar the firm invests in assets, it earns 15 cents.
Try getting that rate on a bank CD. Or a T-bill, for that matter. Pretty much, it’s impossible.
No, the problem for Intel and its shareholders is the stock has become a “value trap.” In other words, investors buy the stock because they see they only have to pay nine times earnings and think it’s a great bargain.
But, as I like to remind tech investors, a $20 stock that goes down is a lot more expensive than a $200 stock that goes up. Look at it this way, if you had simply bought an index fund tied directly to the S&P 500 you would have made a nice 12% return so far this year.
Holding Intel, however, would have cost you more than 19% as of the market’s close yesterday. By buying its own stock, Intel isn’t getting anywhere near the return it could by simply buying a basket of equities.
And it’s actually much worse than it seems. This next number will blow your mind…
$45 billion. That’s the total amount of money Intel is willing to buy back to support the stock.
As I see it, this is a bad use of money for one of the world’s leading high-tech firms. We’re talking about a storied Silicon Valley leader whose history mirrors that of the entire computer world. It still plays an integral role in the global supply of personal computers.
No doubt, it is investing heavily in making its chips ever smaller and more robust. And for that we should be grateful.
But Intel faces a crucial question: is it making enough of the right moves to prepare for the Era of Radical Change? I believe the answer is no.
The world is now moving at warp speed. What was once science fiction is becoming science fact. Those high-tech firms that stand still will just get flattened.
Take the mobile wave we talked about in the past. If Intel isn’t careful, this unstoppable trend will erode its barrier to entry that keeps competitors from stealing market share.
Don’t underestimate the threat here. On the very same day that Intel announced its new debt issue, Investor’s Business Daily issued what should be a wake-up call. The story said a leading designer of mobile chips has entered Intel’s PC market.
Turns out U.K.-based ARM Holdings plc (NasdaqGS:ARMH) is now working with Microsoft Corp. (NasdaqGS:MSFT). In fact, Microsoft is using ARM chips on the new Windows RT operating system. So much for the so-called strong “Wintel” alliance.
As I see it, Intel needs to refocus the firm. Just treading water as a chip maker won’t prepare it to deal with the challenges coming from all the new tech players popping up every day.
But don’t take my word for it. There’s another high-tech giant that saw it needed to change to prepare for the future. This firm could have just stayed with its core computer franchise.
Had it done that, International Business Machines Corp. (NYSE:IBM) wouldn’t be half the company it is today.
Or should I say 85%?
Because that’s how much of Big Blue’s pre-tax income last year came from software and services. Yet, IBM still makes waves with powerful computers.
Just look at Watson. Brimming with artificial intelligence, Watson stunned the world last year by beating humans on the quiz show Jeopardy.
And did I mention that IBM’s stock sells for $189 a share, or more than nine times that of Intel’s? Over the past five years, IBM has returned more than 70% to shareholders. But Intel cost investors more than 25% over the same period.
The comparison of the two is apt for this reason. Last April, IBM said it will buy back another $7 billion of its stock. Clearly, IBM is getting a much better return on its money.
Some of you may say that Intel’s recent decision to make a line of mobile phones is a step in the right direction. Well ask yourself these questions: 1) does the world really need yet another Android phone, and 2) is this the best use of Intel’s money?
To me, it’s no on both counts.
Let me close by noting that Intel has a great chance to set a new course. CEO Paul Otellini retires next May.
Intel needs to make sure its next CEO has a battle plan to deal with the tough challenges that await it in the Era of Radical Change.
Don’t get me wrong. It’s not going away. The famous region at the southern end of San Francisco Bay will continue being home to the world’s top high-tech companies. It’s just that we won’t be able to call it “Silicon Valley” much longer.
After all, the region earned its nickname based on the type of material we use to make semiconductors for a wide range of computers.
And that material is going to have to change.
Of course, silicon still holds a huge lead over other substances in computer chip design. But there’s a fundamental problem with silicon chips.
Engineers are running out of room on them.
You see, the Valley runs on a basic rule that has remained unchanged for many decades. It’s called Moore’s Law, and it states that computing power roughly doubles every two years. This explains why your smart phone is a better, faster computer than the mainframes NASA had when it made its moon shots in the ’60s.
To keep up with Moore’s Law, we need to pack ever more transistors – the tiny switches used to control computers – on semiconductors. The current number stands at more than a billion (on an area smaller than a postage stamp). That’s impressive. But at some point, the law of physics will limit how many transistors we can place on a piece of silicon.
It’s fast getting to the point where we can’t physically make transistors any smaller. And once we run out of real estate, the growth in processing power will hit a brick wall, in turn, slowing the entire pace of innovation around the globe.
That’s why I’m glad to tell you today about a new computing breakthrough from International Business Machines Inc. (NYSE:IBM). They scored a huge advance that could soon put the tech world light years ahead of where we are today.
This novel new material is made of a very familiar substance…
Discovered in 1991, a carbon nanotube is just a single sheet of carbon atoms rolled up into a tube. It’s hard to think of any computing substance smaller than these tubes – they’re 100,000 times less wide than a human hair.
Big Blue’s team placed an array of carbon nanotubes on top of a silicon wafer. Team members then used the tiny tubes to build hybrid chips that had more than 10,000 working transistors.
As you can imagine, it wouldn’t take that many carbon nanotubes to equal in impact what we get out of standard transistors. And that’s just what the IBM found.
To put this in practical terms, IBM showed that these new carbon-nanotube transistors can work as computer switches less than one-half the size of the best silicon tech we have right now. To get more details on what it all means, team members then ran computer simulations of how these kinds of circuits would work in the real world.
Fasten your seat belts, folks…
Based on those models, the team now predicts its carbon-tube system would run five to 10 timesfaster than what silicon can yield. That’s just a staggering increase in performance. It’s like taking your Toyota Prius out to the desert and running it at more than 500 miles an hour.
So, in the near future, your PC, your tablet computer, and smart phone could all run much – I mean much – faster. That’s just what we need, at a time when advanced software and things like high-def video are chewing up bandwidth.
It all cuts to the core of the Era of Radical Change. Once again, we find the U.S. at the forefront of cutting-edge high tech that could have a huge impact on the whole world. High tech is moving at warp speed. What used to be science fiction is becoming science fact – and all because of faster and more robust computers.
In fact, I believe any system that allows our computers to process 500% to 1000% faster will have a huge impact on everything from cancer research to the coming age of space tourism.
Of course, IBM faces many hurdles before it can perfect the new process and get it to market. Team members believe it may take a decade to pull that off – in no small part because the tubes themselves must be highly pure.
In their native state, these tubes come as a mix of metallic and semiconducting matter. But to make electronic circuits work without going haywire, engineers must use a precise mix of semiconductors; no impurities allowed, not even a speck of dust.
To get around this hurdle, the IBM team got creative. They used a process called ion-exchange chemistry. Don’t worry about the details of this approach. It’s very complex. At the heart, it means they found a way to make the carbon pure enough to pack a lot of nanotubes into a very small space.
And this is vital for a simple reason.
Even though the industry in the near future may change to carbon switches, chip makers likely won’t have to retool to make these new high-speed circuits.
Don’t gloss over this fact. It’s key.
It means the industry can use the same factories that cost them billions of dollars to build over the last couple of decades. So, the sector has every technical and financial reason to embrace carbon now.
I’m looking forward to the day when I can say I live just 40 minutes from “Carbon Valley.”
Imagine checking in at the airport, buying a cup of coffee at a local café, even paying for your clothes or groceries at the store’s register… all with a quick wireless scan of your smartphone.
No coins to fumble with. No waiting while the store’s machine dials up your bank. No receipts to sign or stuff into your pocket. The spread of NFC technology is a win-win for the customer and the merchant alike.
With NFC, your phone becomes your wallet. It’s able to “talk” to any vendor, bank, brokerage, or credit card firm you like. This technology is set to take the world by storm. In as little as a decade, billions of people around the world will convert to digital currency as their means of paying for the things they need every day.
There’s just one thing slowing it all down right now – mobile security.
Using mobile phones as de facto wallets alarms some people. They fear that if your phone gets stolen, thieves could gain access to every bank, brokerage, or store account you have.
But that’s about to change.
Indeed, much to the chagrin of thieves and con artists, mobile security will hasten the advent of bulletproof digital money used around the world.
“I think the most important thing to be said about mobile security, and maybe mobile identity, is there are one million organizations in the world that have obsolete, ineffective identification systems now. Most of these things – passports, credit cards, driver’s license, even things we think are reasonably secure, aren’t. And many things aren’t secure at all.“I think that it’s now possible to create a mobile identity system that runs on a smartphone which is anywhere from 100 times to 10,000 times as secure. Not only are they more secure, it’s impossible to counterfeit and impossible to forge.”
In fact, there are three key security features Saylor believes will make mobile commerce the standard of safe business transactions in just a few years.
Take a look…
Mobile Security Feature No. 1: Fingerprint Scanning
Fingerprint tech is a standard security feature around the world. It works because no two people – not even identical twins – have the same fingerprints.
Believe it or not, fingerprinting is actually pretty old. It began in eighth-century Japan. But this ancient approach to security is about to get a big upgrade.
Since many smartphones have touch-sensitive screens, by definition, they work with your fingertips.
All we need to do is convert that screen into a scanner that takes the place of a password. That way, it only works for you. If you lose your phone or someone steals it, the device goes dead.
That’s probably why Apple Inc. (Nasdaq:AAPL) just spent $356 million to buy AuthenTec, a mobile network security firm. The journal ZDNet says AuthenTec’s sensors are the state of the art in touch-based security.
“These fingerprint swipe sensors use a patented sub-surface technology to read the live layer of skin beneath the skin’s surface where the fingerprint is first formed,” according to the author of the ZDNet article. This makes them “much harder to fool than traditional fingerprint sensors.”
Many tech experts believe this acquisition signals that Apple will soon employ fingerprint scans in both the iPhone and the iPad.
Mobile Security Feature No. 2: Eye Scans
The public already has a good sense of how this works. We saw it featured in the popular Bond film “GoldenEye” from 1995 and the first “Mission: Impossible” that came out a year later, as well as 2002′s “Minority Report.” In that film, Tom Cruise’s character John Anderton undergoes a back-alley eye transplant operation to evade the ever present eye scanners of the authorities.
Right now we have two main ways to scan the eyes.
The first is to focus on the retina, the round tissue in the back of your eye that contains a “screen” of cells that respond to light. That annoying “red eye” effect you see in bad photos is actually the camera capturing the retina when the bright flash goes off too fast for the pupil to close.
Saylor notes that the retina serves to “pre-process images,” adding that scientists actually consider it a part of the brain.
Scanning the retina works to establish identity because it has a pattern of blood vessels unique to each person.
The second way we have of establishing identity via the eye is the iris – the colored ring around the pupil. It’s a jumble of patterns. See, no two are alike. Even the iris in your right eye differs from the one in your right.
“The New York Police Department uses iris scans when booking suspects,” said Saylor. “The city of Leon, Mexico, deploys iris scanners in crowded public spaces, where they can identify up to 50 people at once.”
Mobile Security Feature No. 3: Voice Recognition
Most investors already know about voice recognition. They’ve seen it for decades in TV shows like the original “Star Trek” and in the movie “2001: A Space Odyssey.”
In 2012, speech recognition tech has quickly been gaining ground. Apple uses it as a digital voice assistant named Siri that’s in the most recent version of the iPhone. So millions of people already have a sense that voice tech is the wave of the future.
But Saylor rightly draws a sharp contrast between speech and voice recognition. The latter is based on the fact that each person’s voice is distinct.
“Voice recognition doesn’t try to figure out what you say,” Saylor explained, “it tries to determine if the voice is actually yours. The software to identify your voice exists and would be an easy addition to the array of identity techniques available to mobile devices.”
As I see it, these features and other that might appear later can greatly increase both business and personal security. And there’s no reason why you can’t blend several of them together – say, an eye scan with voice recognition – to provide deeper safeguards.
In the future, you’ll have all sorts of biometric security features that will protect your assets and your identity. All of them can both protect corporate assets and empower the individual.
Finally, these same features could also exist inside your PC or even in different rooms within your home to give you a total security package.
We’re not far from the day when ordinary folks will be able to defeat even the smartest hacker around, just by touching or looking into their phone’s screen.
The Apple iPad is more than just a great tablet; it’s the single most important computing device released in more than 25 years.
In fact, you’d have to go back to the introduction in 1984 of the Macintosh personal computer to find a machine as game-changing as this one.
Of course, back then, the Mac grabbed only a small share of the huge PC market. But what it did do was establish Apple Inc. (NASDAQ:AAPL) as the sector’s clear technical leader. It also gave birth to desktop publishing.
This time around, however, Apple has turned the tables on its rivals in two ways…
First, it came up with a breakthrough approach and the ideal screen size. At nearly 10 inches diagonal – very close to the size of a piece of paper – this format feels natural to most users.
Second, it’s a runaway success, boasting 70% of the market share.
That leaves tech investors like us with two choices: Learn what this all means, or get left in the dust.
You see, the PC industry is going into a long decline. It’s already started. Ditto for newspapers, magazines, music distribution, and lots of other physical products that will get transformed into software.
His is hardly an academic view. See, Saylor also serves as the CEO of MicroStrategy Inc. (NASDAQ:MSTR), a leader in business intelligence.
He believes five billion people will use iPads or a comparable device within a decade. That’s roughly 75% of the population of Earth. No doubt, he admitted to me, that’s a bold prediction. He added this:
“It’s a prediction upon which you can make a lot of money if you’re an investor. Because if I’m right, then you will have beaten the crowds to that conclusion. And the reason I believe that is – we’ve reached an inflection point, where it’s now cheaper to learn to read on a tablet than it is to learn to read on paper. And I think that’s a very, very meaningful thing.”
Naturally, I wanted to know just what investors need to do to make money off this trend, so I could share the information with you.
Saylor answered by sharing four key facts every investor needs to know about this market-dominating device.
Here they are…
Key iPad Fact No. 1: Apple Has “Won” the Market
The company can barely keep up with demand for its iPads. It has what amounts to a one-hour inventory. That is flat-out incredible.
Here’s Saylor’s take on it:
“Every iPad they can manufacture, they’re selling. They’re capacity bound. They manufactured 17 million in the past 12 weeks when they reported (earnings). That’s gone from nothing to call it a 70-million-unit-a-year business. And they’re selling these things at $700 each. So it went from zero to $50 billion a year in revenue with a 40% gross margin in (about) 24 months.
“No stock is without risk, but I believe the risk in Apple stock has moved to [only] political intervention. I don’t think there’s really any execution or competitive risk anymore. I think they’ve won the market. I think at this point, you need an enemy – the power of the Chinese government or the EU or the United States of America to put a dent in that steamroller.”
Key iPad Fact No. 2: For Amazon, Size Matters
Saylor considers the iPad an “enterprise” class tablet, because it has a 10-inch screen. At that size it works great as a media-rich mobile sales brochure people can use when meeting with clients. In fact, he and other CEOs have begun equipping their entire staffs with iPads.
Jeff Bezos should be so lucky…
The billionaire founder of Amazon.com Inc. (NASDAQgs:AMZN) introduced the Kindle e-reader and the new Fire version – which competes with the iPad – with just seven-inch screens. That size just won’t work for business users; it’s too small. Says Saylor:
“Now ask yourself this question: Why seven inches, when he automatically seeds 90% of the market to Apple? Why would you do that? Well, I think there is an answer. He’s either stupid, right? Or, he is unable to bring a 10-inch device to the market, right? Those are the only two answers. You fill in the blanks. Do you think he’s stupid?”
Key iPad Fact No. 3: Google Can’t Catch Up
No doubt, Google Inc. (NASAQgs:GOOG) dominates the search-engine sector. No one else comes close. This cash-rich firm invests heavily in other forms of cutting-edge high tech, like robot-driven cars, too.
But in the tablet market, Saylor explained, Google will never become more than an also-ran against Apple. He has great respect for Google co-founder Larry Page, but not even Page can compete with the iPad, and again, it has everything to do with the size of the screen.
“Larry Page is equally rich as Jeff Bezos and equally smart and equally aggressive. He’s engaged in asteroid mining. These guys are not afraid of anything. And so Google also comes to the same conclusion that Amazon comes to, which is, they need to be in the tablet business.
“Do you think they believe in the future of e-Books? Of course they do. Have you ever used Google Maps on an iPad with a 10-inch screen versus a seven-inch screen? Which do you think is better? A book is better, the map is better. Google is in books and maps.
“Larry Page has infinite money. He’s infinitely aggressive. He’s very smart. How come you release the seven-inch tablet? Same issue, right?”
Key iPad Fact No. 4: Microsoft Has Confused the Market
No doubt, Microsoft Corp. (NASDAQ:MSFT) remains the clear leader in the global PC software market. But as Saylor sees it, over the long haul, that is low-growth business – at best. Here’s how he views Microsoft’s tablet play.
“So they announce “The Surface.’ Well, the Surface is a 10-inch tablet. Okay, they got that right. It’s got a keyboard. That’s a liability and an asset. It might be good, but all it tells me is that they’re not going to rebuild all their apps to run without a keyboard. It’s going to be really hard (to use), and you’re going to end up with 47 tool-chip bars and 5,700 keyboard commands, and you’ll want to kill yourself.
“Then they announce they don’t know what chips it will run. They don’t know what operating system it will run, and they’re not sure whether or not it will be on a phone. And they don’t know what it will cost. And they don’t know when it will ship.”
Thus, Saylor believes Apple has already won the tablet wars. He advises investors to keep an eye not just on Apple but on all the firms in Apple’s “ecosystem” – from wireless carriers to chip makers.
At the very least, use caution when going long on any companies that make PCs.
America will re-emerge as the dominate force in technology and economics in the world – by far – as soon as the end of this decade.
That’s thanks to mobile computing.
Our leading position in the rise of smartphones and tablet computers makes it certain that the United States will undergo a major revival and rebranding. U.S. mobile computing will make the dollar stronger, spread American values throughout the globe, and establish English as the single most important language on Earth.
Along the way, this new breed of American tech will improve the lives of billions of people around the world by providing them with better health care and education.
Now, though it sounds like the type of upbeat statements I have shared with you over the past few months, these aren’t my insights.
They belong to a hard-hitting high-tech executive who is a renowned expert on the subject. His name is Michael Saylor, and he is the CEO of MicroStrategy Inc.(NASDAQ:MSTR), a leader in business intelligence.
More to the point, he is the author of the hot new nonfiction book called “The Mobile Wave: How Mobile Intelligence Will Change Everything.” In the book, he makes the case that we’ve passed the tipping point in bringing cutting-edge software to the world. From healthcare apps to text books, it’s all on your smartphone or tablet.
The book is a fast and compelling read. If you want to take a look for yourself, you can find “The Mobile Wave” on Amazon.com.
(As befits the topic, I read Saylor’s book on my iPad…)
Intrigued by what he had to say, I got in touch with Saylor by phone, and we chatted for nearly an hour.
Some may find his comments controversial. After all, it’s the “in” thing these days to bash America as a once-great nation losing its technical lead to China and India.
But Saylor disagrees. He believes mobile software and the wireless Web are major trends that will give the U.S. its high-tech rebirth and bring billions out of poverty in the Third World at the same time.
Here’s how he sees it…
“The mobile wave is about five billion people running software on mobile devices, and only a few hundred million of them are Americans. Only 500, 600, 700 million are western Europeans. The mobile wave is taking this stuff to everybody else in the world.
“If you look at the cost, you know the cost to run software on an iPad, you might be $500 in capital, maybe $1,000. The cost to run software on a PC is 10 times that much, maybe 20 times that much. Think about how expensive it is to put a cubicle on a concrete pad, wire it with electricity and fluorescent lighting with a roof over your head, you know, with Ethernet cable running to you with all of the things that make up a Class B or Class A office space. That stuff’s all so capital intensive as to be impossible.
“There are 1.5 billion PCs on the planet. I think we’re at the peak. We’re not going to see a lot more. I think we’ll actually see them stagnate and maybe start to slide off. On the other hand, I think we’ll see tablet computers go to five billion, maybe more.
“If that’s the case, then the question is, who’s going to write the software that’s going to run on those things? And the answer is, probably English-speaking American companies.
“So the mobile wave is about the rise in power of American software companies exporting their ways in English, sold in dollars, running on American technology controlled by companies like Apple and Google to everybody else on Earth. And by the way, we’re going to spread the American language, the American currency, and also American values.”
America’s mobile tech is already spreading at least the idea of democracy to the Middle East, Saylor notes. Just look at the key role of social media in the so-called Arab Spring.
Protesters used software networks like YouTube, Google, Twitter, and Facebook to spread their message and organize the revolution that turned a dozen nations upside down. Indeed, those uprisings have shaken Arab nations to the core, toppling leaders in Egypt and Libya and causing mass protests in Iran.
No doubt, radical Islam remains a threat to freedom. But Saylor seems to think that movement is reaching its zenith as the mobile wave bears down upon repressive regimes. This trend will greatly enhance women’s rights in the Middle East and developing nations, Saylor told me.
Smartphones and tablets are like a Pandora ‘s Box: Once the masses gain exposure to the Western world’s knowledge and way of thinking about women, there’s just no turning back.
I’ll have more of Saylor’s insights to share with you in my next two reports. We’ll deal with what investors must know about Apple Inc.’s (NASDAQ:AAPL) iPad and three ways to make mobile commerce more secure as we convert to digital money.
For now, let me close with one more of Saylor’s big-picture views about the impact of the mobile wave:
“I think most politicians and most macro economists don’t appreciate the technology effect here. The single most powerful thing going on is this massive wave of software. This software is dematerializing 50% of the worldwide economy.
“Fifty percent of the gross world economy is being remade by the software, and that software is American software. And when it rolls through everybody’s country, it’s addicting them to our technology, our values, our language.
“It’s chiseling away at the Chinese walls. It’s chiseled away at the Russians. It’s chiseled away at all the walls in the Middle East. And as a result, it’s making America the cultural, intellectual center of the Earth. Nobody has critical mass to stand against that.”
Like I keep saying, technology will save America. Stay tuned for the next two reports…
Some years ago, as a young reporter in Detroit, I was covering the battered auto industry and landed a fascinating story about how computers would play a big role in the industry’s near future – both in designing and making cars.
As you probably know by now, I have an insatiable curiosity for all things tech.
That’s why, almost as soon as I handed the auto computing story off to my editor, I was back on the road…
I had to know more about computers.
I drove directly to the nearest computer retailer to talk with people there – customers and salespeople alike – about their use of these early-stage personal computers, then used mostly as hobbies.
I was stunned to meet three teenage boys who said they went to the store every day after school to hang out. And no, they weren’t playing games. They were “writing code” – creating new applications for a device that many adults still hadn’t bought into.
A few days later, I filed a story predicting computers would revolutionize the world as we know it. I guess I wasn’t far off…
The year was 1981 – three years before Apple Inc.‘s (NASDAQ:AAPL) Mac debuted and five years before Microsoft Corp. (NASDAQ:MSFT) went public.
To this day, I still watch the trends young people embrace to try to keep abreast of the next technology; I think teens can play a profound role in writing the road map of the future.
That’s why last week I told you about a group of tech-savvy young people with a lot of talent – kids who’ve won recent science and engineering contests sponsored by Intel. (See “These Teen Geniuses are Agents of Radical Change.”)
So, I have to say I was pretty excited to pick up a copy of yesterday’s Wall Street Journal…
The nation’s leading business daily carried its own version of that same story on Monday; it ran a section-front story on a group of kids from around the country (and the world).
These kids aren’t sitting around whining about how they can’t find a job at the local hardware store or burger joint. They are taking matters into their own hands and writing all sorts of new apps – or application software – for others to use on Apple’s iPhone.
One boy from Connecticut has earned $8,000 to date from sales of his apps. Oh yeah, he’s 13 and self-taught. He owns his own company now; he calls it Bread and Butter Software LLC.
Here’s the thing. Apple has seen intense teen interest (and aptitude) in writing apps for the sector’s leading smart phone. That’s why, this year, the company lowered the minimum age from 18 to attend its developer meetings and now allows kids as young as 13 to take part.
These are marquee events that draw thousands to learn more about the hot new products Apple has on the drawing boards and ways to profit by pushing the firm’s high-tech to the next level. The latest show was held just last week, and several young teens came to San Francisco for it.
Apple must agree with me about tech-centric kids, because, according to the Journal, the firm supplied 150 teens with “scholarships” to cover the $1,599 entrance fee.
I see Apple’s teen program as vital for two reasons.
1) First, it shows exactly how bright young entrepreneurs respond to challenges: They work around them.
Just last week, I heard a radio news report saying the U.S. teen jobless rate is the highest since World War II. Fact is, that stat has held true for the last three years.
To a lot of people, it might sound like kids today face a bleak future, at best.
After all, many of them are putting off college until the economy shows more strength. And lots of recent college grads find themselves moving back in with mom and dad, unable to support themselves and strike out on their own.
To some, the report might have cast doubt on one of the key reasons I’m so optimistic about the future – that young people will solve many of the big problems facing us today.
But not to me…
You see, from decades of following trends, I know that recessions often give rise to a whole new round of entrepreneurs. I believe those seven bright young folks I profiled – and others like them – see promise where others see pitfalls.
You can see that in the app story; these kids are ignoring the jobless rate and creating their own futures.
As I see it, they will become key drivers in the Era of Radical Change. The next few years will be like nothing we’ve seen before, in no small measure because America is a nation of youthful energy.
Who knows… Apple’s conference may have already attracted the next Mark Zuckerberg – the co-founder of Facebook Inc. (NASDAQ:FB). No doubt, that company’s recent IPO proved controversial, but Facebook still boasts some 900 million users around the world. It also has a $68 billion market cap.
2) Second, in my note to you Friday I said young geniuses have an advantage today. They possess high-tech tools that earlier generations could only dream about.
These days, all they need is a smart phone, a creative idea and few lines of software code to change the world.
What’s more, as the Journal story makes clear, they are actually creating those tools themselves. And the iPhone is the perfect platform. It has given rise to whole new industries like mobile healthcare.
So, if you want a snapshot of the future, you just might find it in the palm of your teenager’s hand.
Michael
P.S. I’ll have more to say about this key trend later this week at MoneyMorning.com. I hope you’ll tune in.
