Don’t expect things to slow down. At least not right now. We are now in an Uber Economy – an economic evolution that is solving massive consumer inefficiencies to create entirely new spending categories. This is how our U.S. economy will continue to grow. Taking inefficient industries like cabs, home based lodging, food delivery, personal cooks, etc. and creating whole new categories for spending. Making inefficiencies efficient in a meaningful way that will encourage brand new economic activity.
Mark our words, the Uber Economy will have us spending money next year on something that doesn’t even exist today.
What’s so special about the Uber Economy is that we see many of these new brands and companies emerging in the technology industry. Over the past 2 years, we’ve closely tracked this industry, watching the emergence of IPOs such as Facebook to the $10 billion valuation of companies like Airbnb. And many of you, our readers and our clients, are asking us our thoughts on it all. So here’s our take on tech…
Will We Be Faced with Another Tech Bubble Soon?
In 2012, we addressed this notion. While the technology sector has continuously created lots of jobs and wealth, we were concerned about getting a “buyer beware” sense of déjà vu. The huge acquisitions we’ve seen over the past 2-3 years and ridiculous numbers (millions become billions in four days?) remind us of the tech bubble that marred the start of this new century.
Innovation drives the American economy. Since the days of Ben Franklin, we have celebrated and handsomely rewarded those who come up with The Next Big Thing. In recent years the creators of “apps,” have epitomized American inventiveness. In mid-2008 just 500 were apps available. By 2012 there were more than 350,000 on the market with a projected revenue around $29 billion by 2013. This has only grown.
And what about company valuations? Within the tech sector today, we are able to see a visible split amongst companies’ valuations. When looking at the whole, many feel the sector is vastly overvalued. Some even worry that another tech bubble is on the horizon… one similar to what we saw in the early 2000s. And this is a feeling amongst some despite the NASDAQ still being about 600 points from the all time high we saw back in 2000 (more details about this here).
Our Take on Tech
So there could be a tech bubble on the horizon, but not if we continue to operate in this Uber Economy where our new age inventors are constantly improving inefficient industries and creating, for lack of a better term, disruption.
What else needs disruption? What other consumer related industries are a mess and could be improved dramatically?
We’re now in a place where As you look ahead and you explore where to invest, right now, we say watch.
Those looking for more conservative investment opportunities would do themselves well to screen the industry by age and find those seasoned technology veterans. These seem to be best positioned from a P/E standpoint at least.
Whether this bubble is to burst or not, as the tech sector continues to heat up with Instagram-type deals, look for ways to cash-in while maintaining a diverse portfolio that is in line with your long-term goals and risk tolerance. If you’re not a fat cat who can invest in private equity funds, consider looking at a technology-based index fund or ETF.