I just watched yet another news report claiming we are in the middle of a big “tech bubble.”
Frankly, I’m getting sick of it.
When I have to argue back against the tech naysayers on cable, I always come back to a basic truth: Tech is the single biggest factor driving the economy today because it impacts every single sector.
Look no further than corporate balance sheets. Just two weeks ago, Moody’s Investor Service said five tech leaders alone account for 30% of U.S. corporate cash held by nonfinancial firms.
If we’re really on the verge of a bubble, then why are so many tech firms essentially printing money?
To help prove my point, I’m going to ask the tech-bubble crowd – I’m looking at you, Mark Cuban – to lay it on the line.
No wagering here. I’m simply asking Cuban and the rest of these Neo-Luddites to accept my “Dump Your Tech” Challenge.
When I hear Cuban and these other so-called experts talking about the “tech bubble” these days, what they’re really talking about is the “unicorn bubble” – the more than 160 privately held, pre-IPO tech firms valued at $1 billion or more.
Yes, many of those so-called unicorns are overvalued. And yes, if that “bubble” pops – when some of those $1 billion+ startups begin shutting down thanks to bloody-red balance sheets – some venture capitalists and hedge funds are going to get hurt.
But that’s just a tiny slice of the Silicon Valley pie. Plus, it’s barely relevant to the public stock markets – those are all privately held companies that we’re not invested in.
Recall those five tech leaders that account for 30% of nonfinancial U.S. corporate cash. That’s $504 billion on hand at Alphabet Inc. (Nasdaq: GOOGL), Apple Inc. (Nasdaq: AAPL), Cisco Systems (Nasdaq: CSCO), Microsoft Crop. (Nasdaq: MSFT) and Oracle Corp. (Nasdaq: ORCL).
If that’s a bubble, pass me the wand.
After all, we’re in the middle of an emerging “Convergence Economy.”
I’m talking about the merging of mobile devices, artificial intelligence, semiconductor chips, sensors, the cloud, Big Data, Wi-Fi, broadband, e-commerce and streaming video, just to name a few.
In other words, we’ve long since passed the “tech tipping point” – and technology is now the “default” in every part of our lives.
Don’t believe me? Then I invite you, the Dallas Mavericks owner and any other “tech bubblers” can take my “Dump Your Tech” Challenge right now…
“Dump Your Tech” Challenge No. 1
Throw Your Smartphone in the Toilet
The iconic iPhone launched nearly six years ago, on June 29, 2007.
Apple’s foray into handhelds was the birth of the smartphone revolution. It took the Silicon Valley legend 74 days to sell the first million of that first-gen device.
Gartner says that last year alone, global smartphone sales hit 1.4 billion units, up 14.4% from the year before.
And there’s a good reason why sales remain robust – for most people in advanced economies, the smartphone is as much a necessity as a pair of shoes. Billions of people use their smartphones for following the news, texting, emailing, snapping photos and “home movies,” getting directions, listening to music and mobile shopping.
In a separate study, Gartner says that, by the end of this year, roughly half of all employers will require workers to have their own mobile phones. No wonder Grand View Research says the global bring-your-own-device market will be worth $225 billion by the end of this decade.
Let’s not forget that if we all chucked our smartphones in the toilet that would mark the end of ridesharing (Uber and Lyft) and next-gen messaging and photo sharing (Snapchat, Instagram and WhatsApp), and first-gen social media (Twitter and Facebook).
“Dump Your Tech” Challenge No. 2
Cancel Your Netflix Account
As I see it, the history of Netflix Inc. (Nasdaq: NFLX) proves just what I’m saying. Launched in 1998, Netflix began as a U.S.-only service that provided DVD by mail. That’s right – snail mail.
Netflix began streaming movies in 2007 and has never looked back. Today, it operates in 190 countries and has more than 81 million subscribers, 46 million of them in the United States.
One of the more disruptive platforms of the last 10 years, Netflix brought us the era of 24/7 online entertainment. It also gave rise to other services like Hulu and Apple TV and helped pave the way for YouTube as a viable Web channel.
Consider that eMarketer says the number of U.S. digital TV viewers will reach 145.3 million in 2017, up from 106.2 million in 2012. The growth follows a shift from cable television to streaming video that is also driven by the rise of smartphones and tablets.
Of course, it’s not just movies and TV shows we’re talking about. Streaming has also turned the entire music industry upside down. CD sales remain in the toilet – and digital downloads are slowing down – but services like Pandora, Spotify and Apple Music are on the rise.
In other words, Web-based streaming is the future of home entertainment.
“Dump Your Tech” Challenge No. 3
Stop Using the Cloud
If you have kids or grandkids, they’re probably big users of the cloud – and don’t even know it.
Here’s the thing. Today’s young people love to stay in contact with each other using photos, such as with Snapchat, or short videos, shared through Vine. Both those services wouldn’t be possible without access to remote data centers – the cloud.
Further, hundreds of millions of adults use the cloud to back up all the data they have on their PCs. Not using the cloud would mean they’d have to return to backing up everything on an external hard drive.
But as vital as this aspect of the cloud is, it pales in comparison to the needs of businesses and government agencies. These enterprises store their data on the cloud and get many of their applications via software as a service (SaaS).
This explains why the cloud leader, Amazon Web Services, brought in $2.5 billion in cloud sales in this year’s first quarter, a one-year increase of 64%. Plus, Amazon.com Inc. (Nasdaq: AMZN) now faces cloud competition from the likes of Alphabet and Microsoft, demonstrating just how fertile this market is.
The sector has become so crucial that just one part of it, SaaS, will be worth $106 billion by the end of this year, according to data compiled by Forbes. That’s up 21% from 2015 levels.
“Dump Your Tech” Challenge No 4
Only Shop at Brick-and-Mortar Stores
Consumers and their purchases account for roughly 70% of the U.S. economy. More and more, they’re buying their goods and services online, a trend that will only continue to grow.
Yes, e-commerce still lags physical stores in total sales volume. But it is, by far, the fastest growing part of retail.
Forrester Research pegs the growth at 10% per year from 2012 through 2017. By then, the Web will account for 10% of all retail sales, totaling $370 billion.
Back in 2000, e-commerce sales stood at just $27.8 billion, or a mere 0.9% of retail. We’re talking a 13-fold increase in 17 years. Not only that, but by the end of next year, 60% of all retail sales will involve the use of the Web in some manner.
But these stats actually understate the impact of online shopping. Before hitting the mall or car lot, most people do online research and make their decisions before leaving the house. Retailing Today says 81% shoppers go online before they step into a store.
I Double-Dog Dare You
The idea that tech is in a bubble is baloney. It’s a belief coming from people who still think of “tech” as a field unto itself.
But as you can see from just the four challenges I “double-dog dared” you on today, high tech is literally the fabric of our lives.
And as each day passes, tech becomes even more vital to the way we work, shop, stay informed, keep in contact with friends and family, and enjoy our free time.
So, if you want to make profit in the long haul, you must invest in tech.
Otherwise, you’re missing out on the trends that truly drive the economy – and build investors’ net worth.
P.S. I’ve sent this “Dump Your Tech” Challenge to Mark Cuban via – of course – Twitter. I’ll let you know if I hear anything.
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