Editor's note: Every major technological shift creates a new group of winners... and leaves a trail of former industry leaders in its wake. As our colleague Whitney Tilson explains in this issue, which we last shared in DailyWealth in August 2022, innovation always changes who's in charge. Now, billions of dollars are flowing into emerging technologies that could define the next era of investing...
As technology evolves, the victims always pile up.
Take camera and film maker Kodak...
Ironically, 24-year-old Kodak engineer Steven Sasson was the first to develop the digital camera in 1975... using leftover parts from Kodak's factories. Sasson's prototype was the size of a toaster and took 23 seconds to take a black-and-white photo. As he later told the New York Times...
But it was filmless photography, so management's reaction was, "That's cute – but don't tell anyone about it."
Every digital camera that was sold took away from a film camera and we knew how much money we made on film. That was the argument. Of course, the problem is pretty soon you won't be able to sell film – and that was my position.
As Sasson expected, consumers rapidly switched to digital photography and stopped buying film. Sony, Nikon, Fujifilm, Panasonic, Olympus, and others eventually went all-in on digital photography... And Kodak's film couldn't compete in the new world.
The company filed for bankruptcy protection in 2012.
New technologies bring disruption. They create winners – and losers. Today, I'll show you how this pattern plays out again and again... and why we can expect a new wave of winners in the years ahead.
How Smartphones Crushed the Digital Camera
When Apple (AAPL) introduced the first iPhone in 2007, it had a small 3.5-inch screen and a low-resolution, 2-megapixel camera...
Apple's competitors weren't impressed. Executives across the tech industry didn't think the iPhone would be a serious player.
Anssi Vanjoki, the former chief strategy officer at Nokia (NOK), said...
Even with the Mac, Apple attracted a lot of attention at first, but they have remained a niche manufacturer. That will be their role in mobile phones as well.
Steve Ballmer, who was the CEO of Microsoft (MSFT) at the time, famously dismissed the iPhone, saying...
That is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard. Which makes it not a very good e-mail machine.
And BlackBerry's (BB) co-CEO at the time, Jim Balsillie, shared the sentiment...
It's kind of one more entrant into an already very busy space with lots of choice for consumers... But in terms of a sort of a sea-change for BlackBerry, I would think that's overstating it.
But since its release, Apple has sold more than 3 billion iPhones. Today, it's not only the bestselling smartphone, but one of the bestselling consumer products of all time.
By the time the iPhone 13 came out in 2021, it featured a 12-megapixel camera and could record high-resolution video in 4K. (The latest models are far better.)
And the critics were proven wrong long before that. Shortly after the death of film, people essentially stopped buying digital cameras, too...
Smartphones have killed off a whole host of other products besides the digital camera... including pay phones, pagers, GPS devices, and alarm clocks.
New Tech Beats the Skeptics... And the Competition
Just like Apple, most of the biggest winners of the past two decades have left a path of destruction behind them.
Think about the dozens of businesses that retail giant Amazon (AMZN) has wiped out, including big names like toy store Toys "R" Us, bookseller Borders, and electronics retailer Circuit City.
Yet even within the past decade, executives at brick-and-mortar retailers were skeptical about Amazon. As former Foot Locker CEO Richard Johnson said in a 2017 earnings call...
We do not believe our vendors selling product directly on Amazon is an imminent threat. There is no indication that any of our vendors intend to sell premium athletic product, $100-plus sneakers that we offer, directly via that sort of distribution channel.
At the time, Foot Locker's market cap exceeded $10 billion. It was acquired by Dick's Sporting Goods (DKS) last year... at a valuation of just $2.4 billion.
The list goes on and on...
- Streaming giant Netflix (NFLX) has delivered a crushing blow to movie theaters
- Music-streaming company Spotify Technology (SPOT) has disrupted radio
- Zillow (Z) is disrupting the archaic realtor business model
- Expedia (EXPE) made travel agents obsolete
- Uber Technologies (UBER) has squeezed taxis
- Airbnb (ABNB) has taken a huge chunk out of the hotel business
As technology evolves, the victims always pile up.
People are always skeptical about the future, until it's here. The good news is that you can flip this on its head to find the likely winners of the next decade...
As billions of dollars flood into spaces like artificial intelligence, financial technology, the blockchain, electric and self-driving cars, big data, and genome sequencing, we'll see plenty of winners and losers.
Best regards,
Whitney Tilson
Editor's note: AI stocks have been on a wild ride lately. But Whitney Tilson and Brownstone Research founder Jeff Brown believe that investors can use this volatility to their advantage. Last week, they went on camera to reveal a "super chip" 50 times faster than Nvidia's... and two free stock recommendations they believe could benefit from the next phase of the AI revolution.
Further Reading
You don't need a Wall Street research team to spot the next big investment trend. Sometimes, consumer behavior trends can hide the most valuable clues. And learning how to spot those signals could give individual investors an edge over the institutions.
AI agents promise to take work off employees' hands. But giving these digital workers access to company systems creates a new set of risks. Now, businesses need ways to control what agents can see, change, and do. That could create a powerful tailwind for an overlooked corner of the AI market.
