One of the most naive idioms of all time is that the world will beat a path to your door if you build a better mousetrap. In fact, you’re more likely to be charged with endangering some previously unknown subspecies of rodentia.
Readers of my investment letter, Breakthrough Technology Alert, know that historically, the media, the public and the financial community have resisted big changes. Great ideas have a way of succeeding, but they do it without the help of “the world.” Inventors and scientists routinely spend more time and effort defending their ideas than they spent making their discoveries.
A good example comes from this year’s Nobel Prize for chemistry. The recipient, a scientist at Israel’s Technion Institute in Haifa, used electron microscope technology to discover an entirely new molecular structure now known as quasicrystals. In 1982, while on sabbatical at Johns Hopkins, Dan Shechtman discovered metallic quasicrystals. For nearly three decades, however, he was mocked for saying so. The very notion of metallic, five-sided, nonrepeating crystal structures was ridiculed.
Nobel Laureate Linus Pauling mounted what has been described as a personal “crusade” against Shechtman. “There is no such thing as quasicrystals,” Pauling claimed, “only quasi-scientists.” The scientific team Shechtman was working with gave him the boot for “bringing shame” to his colleagues.
Today, however, scientists all over the world are exploring the potential of nonstick, rust-free, heat-resistant quasicrystals.
Other breakthroughs are even more difficult to recognize. They may involve an unproven superior marketing, distribution or presentation technology. Sometimes, breakthroughs happen when something new is applied to an older and seemingly dated technology. We’ve written here, for example, about new materials that have radically improved flywheels. These energy conservation devices are currently used in high-end race cars and have the potential to save energy and add automobile performance in a more cost-effective manner than batteries.
This is just one example of a new technology revolutionizing an old design and industry. Consider a somewhat less obvious example, Amazon.com.
Healthy retail mail-order businesses existed long before the founding of the Seattle-based company in 1994. Over a hundred years ago, Sears, Roebuck and Co. built a successful business based upon rapidly improving mail delivery service and printing technology. Sears, Roebuck catalogs were common in urban as well as remote rural homes. Customers all over America bought mail-order tools, piano rolls, coca wine and even tape worms for weight loss.
In the ’90s, I was consulting at Netscape, where the truly interactive and open Internet came into existence, along with the encryption technologies that enable secure e-commerce today. In retrospect, Amazon.com’s success seems almost inevitable given the emergence of those tools, but that’s not how people saw it at the time. Enormous skepticism about the practicality of the new technology existed. Mockery was far more evident than belief that the world would change radically due to network technologies.
If the potential and benefits of the Internet and e-commerce had been obvious at the time, we could assume that Sears and other existing mail-order businesses would have taken advantage of the opportunities. With plenty of capital and established supply and distribution networks, it would have been far easier for Sears to build a Web version of their catalog.
The “smart money,” however, considered the Internet a fad with limited practical application. “Trust us,” the experts said, “the real action will always be in the catalog business model.”
Amazon astutely exploited both the shortsightedness of established businesses as well as the emerging electronic communications technology, eclipsing catalog marketers by pushing retail where it had never gone before. Creativity and vision proved more important than the advantages held by pre-existing mail-order businesses. Today, Amazon is the world’s largest online retailer and the premier online shopping destination. Recently, they have even begun to compete with television networks and movie rental businesses via online streaming.
Amazon.com, however, ranks well behind the world’s largest retailer, Wal-Mart. The success of Wal-Mart Stores Inc. is worth discussing here for a number of reasons. One is that Wal-Mart’s stock has increased in value more than 160,000% since its public offering in 1970. It is widely reported that $1,000 of that IPO equity would be worth more than $1.5 million now. Another reason is that it is not obvious that Wal-Mart is even a breakthrough transformational company.
From the outside, Wal-Mart appears just like any other big-box brick-and-mortar retailer. It is not. Inside the wrapper is the founding vision of the Eagle Scout and entrepreneur from Kingfisher, Okla., Samuel Moore Walton. Very early, he realized the power of emerging information technologies. Rather than wasting time telling others about this potential, he implemented it himself.
Walton leveraged emerging IT to boost the efficiency of his logistical supply chain. Other retail companies wasted resources by warehousing goods and then delivering them to stores as need was perceived. Walton did something entirely new. He bought goods only when they were needed imminently and had them shipped exactly where they were needed. He could do this because he had computerized his entire enterprise.
Goods on shelves are not simply idle. They cost money. They tie up capital and shelf space, consuming and wasting resources. Walton realized that he could sell goods for less not just by negotiating better wholesale prices. With new inventory and data mining tools, Walton was able to determine precise location-based needs. He could determine even where within the store a product sells best.
He lowered his real price of the acquisition of goods by reducing storage, financing and transportation costs via IT. Because of those better prices, he sold more. The sales volume he generated then allowed him to negotiate better wholesale costs. Because of superior in-store computerized communications, he could spread information throughout his corporation and deal with problems in record time.
In each of the examples cited above, pioneers of industry were ridiculed and mocked for their ideas…ideas that would become revolutionary breakthroughs in their respective fields. As investors, we can learn a lot from their successes.
Change, after all, is nurtured at the fringe. Embrace it.
for The Daily Reckoning
Patrick Cox has lived deep inside the world of transformative technologies for over 25 years. This expertise lead him to Mauldin Economics, where he now heads Transformational Technology Alert.
Pingback: plantacja lawendy()
Pingback: jazda konna()
Pingback: zombie apocalypse bug out bag()
Pingback: vertical response login()
Pingback: make money online()
Pingback: European golf course()
Pingback: app to manage instagram followers()
Pingback: autoversicherung vergleich()
Pingback: shoulder injury()
Pingback: small business ideas()
Pingback: click here()
Pingback: people person()
Pingback: empower network()
Pingback: mickey rourke cosmetic surgery()
Pingback: epromos custom apparel()
Pingback: australian power cable()
Pingback: home remedies for skin tags()
Pingback: flugzeug mieten()
Pingback: empower network review()
Pingback: seguro de autos baratos()
Pingback: kardashian sisters()
Pingback: where to buy raspberry ketone()
Pingback: Wartrol Reviews()
Pingback: how to remove a wart()
Pingback: hpv treatment()
Pingback: fat loss factor review()
Pingback: horror movie reviews()
Pingback: ariana grande fotos hd()
Pingback: one direction pictures()
Pingback: casino con bonus senza deposito 2012()
Pingback: remedios caseros para los ronquidos()
Pingback: adelgazar para siempre()
Pingback: Conceive A Girl()
Pingback: raspberry ketones benefits()
Pingback: book of ra echtgeld bonus()
Pingback: Woods Location()
Pingback: buy real estate alexandria egypt()
Pingback: scarsdale diet wednesday dinner()
Pingback: selena gomez stars dance tour 2013()
Pingback: seducir a mi ex()
Pingback: аренда квартир в Минске()
Pingback: rybne jedzienie()
Pingback: e cigarettes starter kit()
Pingback: Decor roofing()
Pingback: linkedin engineering blog()
"There has been an issue that has preoccupied my mind for a long time," writes Dr. Marc Faber. "In economics, it is generally accepted that if the quantity of money and credit is increased, prices will rise… However, since economics is so complex… I question whether the expansion of central banks' balance sheets and policies of zero interest rates could have a deflationary impact…" The good doctor wrestles with the question, in today's essay...
The Biotech iShares ETF is up 23% since the Oct. 15th bottom. No, that is not a typo. Biotechs have torched the S&P over the past two months--more than doubling the returns of the big index. And biotechs as a group are up more than 38% year-to-date. In fact, since we first highlighted the June comeback, the Biotech iShares have gone nowhere but up.
The oil market has been under siege for six months. From service providers to producers this downturn has been painful. Of course, we’ve known all along that oil prices were a little toppy over the summer. In fact, when asked just how low oil prices could go I usually answered with a simple “lower than you’d expect…”
Our forecast that Cuba would be open and integrated within 5-10 years is on track after yesterday's big announcement. Ahead of schedule, even. Click here to see how some investors have profited and what the island's likely future is...
The opportunity to sell and install LEDs is enormous. We’re talking about over a billion lighting fixtures. And the areas with the largest potential -- like parking lots -- have barely begun to change. Banker to the presidents Chris Mayer says you could triple your money in this new tech trend. Here's what you need to know.
It's a theme we've shared with you since April. And it's only gotten worse. The gaming industry has come under all sorts of pressure--a situation I first noticed in the charts. The powerful, multi-year uptrends started showing cracks. And it wasn't long before those cracks turned into gaping holes you could drive a friggin' truck through. That's where things stand today.