In today’s show, Doug talks about investing in technology. Despite the risks involved in technology investments, there may be subdomains within technology that can be good returns.
A few of the big picture domains include:
- Semiconductors or chips: basically, anything that has a chip inside. This industry is worth millions, if not billions, of dollars.
- Software: from Facebook to Twitter to your operation system, everything runs on a code that someone wrote.
When investing in technology watch out for:
- Tech stocks are often traded at a premium compared to other market categories because of expected above average growth rates.
- Tech companies often do not have profits – sometimes they don’t even have cash flow!
There are many investment instruments you can use if you decide investing in technology is in congruence with your risk tolerance level.
Technology stocks want to make the world better. Can they also improve your investment returns?
Dr. Peter Diamandis, Chairman and CEO of XPRIZE, and Best-selling author of Abundance and Bold, explains why he thinks that the world is a much better place than it used to be. People are living longer, and personal incomes and living standards are higher than they have ever been.
But is Diamandis too optimistic?
Should all of this good news be tempered with great caution?
Hear Diamandis respond to that question and also explain what areas of the economy are most likely to grow in the near future.
Follow Peter Diamandis and his great ideas for improving the human condition with incentive prizes and other projects here:
Watch Abundance on YouTube.Read the Transcript
Interview with Peter Diamandis
Peter Diamandis, chairman and CEO of XPRIZE, and bestselling author of Abundance, explains why the world is a better place today than it used to be. What are the grounds for his optimism, and can you be too optimistic when looking towards the future?
Douglas Goldstein: Peter Diamandis is the chairman and CEO of XPRIZE, which is probably best known for encouraging private space flight and also for the 100-mile per gallon equivalent car, which is an amazing prize. He also wrote a book called Abundance.
You talk about a lot of excitement in the book, and I strongly encourage everyone to read it. But shouldn’t we temper that with a bit of caution? After all, you put a lot of hope into technology, but that’s the same technology that’s brought us global warming and nuclear engineers, which not only bring us energy but also bombs. There’s so much risk involved.
Peter Diamandis: About a year ago, I was closing out the Clinton Global Initiative and President Bill Clinton mentioned the book. As he introduced me, he goes, “Peter, why are you so positive about the future? Don’t you watch the news?” and I said, “President Clinton, I’m positive about the future for two reasons. One, I try not to watch the news, and second is I look at the data.” The reality is we, as humans, pay ten times more attention to negative news and positive news. It’s an evolutionary benefit because as we were evolving hundreds of thousands millions of years ago, if you missed a piece of good news like some food over there, too bad. But if you missed a piece of bad news, like there’s rustling in the bushes, and it’s a tiger and not the wind, the consequences could be a lot more serious. So all of us have opened a piece of our temporal lobe called the “amygdala” that scans everything we see and everything we hear for negative news. We pay ten times more attention to negative news. As a result, most news programs, such as CNN, which I call the crisis news network, or constantly negative news network, whatever it might be, will feed us not news that’s not true but a disproportionate ratio of positive news to negative news, meaning far more negative news, and that colors the way we see the world. It’s not to say again this isn’t happening and that the world does not have a lot of improvement, but the fact is the world has gotten extraordinarily better over the last hundred years by almost every measure. The data shows us that with regard to per capita income for almost every nation, the planet has more than tripled.
The World Bank just this month reported that we are now reaching a point where less than 10% of the world is in extreme poverty, down from 99% of the world being in extreme poverty. The human lifespan has more than doubled and has the potential to double again. The cost of food has dropped 13-fold, the cost of energy has dropped 20-fold, the cost of transportation a hundred-fold, and communication over a thousand-fold. Steven Pinker at Harvard has demonstrated that on a global basis, we’re living during the most peaceful time ever in human history, and your chance of dying a violent death around the world on the average is 1:500 what it used to be.
How Does Positive Information Benefit the Average Person?
Douglas Goldstein: Is there a connection between what you’re talking about and what normal people can benefit from? How they can say, “I’m going to invest in this new technology or this new idea and it will change my life,” not just, “I’m going to buy a new iPhone”?
Peter Diamandis: The companies that are crushing it, that are becoming the most valuable companies in the planet, are technology companies. There are companies that are data driven. They are using a combination of all of these technologies, riding on top of rapidly growing computational power. These are companies that are using massive computational power, the cloud, using AI robotics, network censors, and 3D printing. These are the companies that are disproportionately growing fast and changing our lives. We’re going to see these exponential technologies, and all these I have to mention sits inside of a university I co-founded with a gentleman named Ray Kurzweil, one of the smartest people in the planet, one of the leaders in AI. Ray and I realized that there was no place on the planet you could go and really get an overview of all of these technologies. You can go to the top technological universities in Israel or MIT, or whatever it might be, and become an expert in one area, but where would you go to really get an overview of all of these fields and where they are converging and where they are going? It’s the convergence of all of these rapidly growing fields that causes these amazing unexpected changes. I would say that these fields are going to have the potential to re-invent our lives. They are going to lead towards doubling the human lifespan once again as we make health care preventative and predictive, as you are monitoring everything that’s going in on your body from censors and networks that we have, and your AI has become your physician. It’s going to allow us to have a world that’s for more literate. This is why I funded the XPRIZE foundation which I run with $15 million prize to allow for autonomous scalable education. How do you build an Android app that sits on top of a tablet or a phone that can help us bring 250 million illiterate kids around the world to literacy?
Douglas Goldstein: Watching these changes that you’re talking about, if regular people want to be involved, what should we be focusing on? When investors or regular people say, “I want to be part of the future,” we all usually get signed up for our healthcare plans, so we don’t benefit from that. We buy whatever cell phone has the best ad or the cheapest monthly fee. What’s the path that you would advise people to really follow?
Peter Diamandis: First of all, it’s about education. It’s understanding that we as humans think in a local linear fashion because our brains have a little bit of time that’s local linear and we’re living in a global, exponential world. So we built Singularity University. and it’s is a place where we built an executive program in Silicon Valley. We have significant alumni based in Israel. It’s a very active program. We’re active in 80 countries around the world, and Singularity University is working on creating a singularity summit at the end of 2016, where people can come and learn about this stuff. I put out a weekly blog post at www.diamandis.com where you can sign up for it. Every week, I’m looking at, “Here are the stories. Here’s the technology that is changing your life. Here are specific examples of what you can learn about.” But it’s really the same when bombarded by negative news. The question is, can you allow yourself to be educated every week by, “This is the breakthrough going on in artificial intelligence or 3D printing or synthetic biology that opens up your possibilities”? Today it’s the realization that 40% of today’s Fortune 500 companies, the largest companies in the world, are going to be gone in the next decade, and we’re having companies going from, “I’ve got an idea” to, “I run a billion dollar company” almost overnight. Uber goes from zero to $5 billion valuation in five years, and how do you do that? We’re going to see these exponential companies intersecting with linear. Governments are going to have these battles, but the government regulation is only going to last that long because the service is not much better for people, so the government is going to change their tune eventually.
The Reinvention of Health Care and Space Travel
I’ve just started a venture fund bold capital partner in partnership with Singular University, specifically to invest in these kinds of things, and I’ve started with 17 companies over the years. My latest one is a company called Human Longevity. We’ve built the world’s largest genome sequencing facility in the planet, and we’re really focused on collecting data for millions of individuals. Your entire genome sequence, your full body MRI, all of these data gets data-mined to actually tell you, “This is what you’re going to come down with,” before you come down with it. This is what you need to do to make sure it doesn’t harm you. So we’re going to reinvent health care.
One of my other companies, Planetary Resources, builds spacecraft. We launched our first one a few months back, whose mission is to go out to prospect near-earth asteroids for fuels and precious materials. We’re living during the most extraordinary time ever in human history. Every day, science fiction is becoming science fact.
Douglas Goldstein: You created the XPRIZE in order to get people into space because it’s clear you have a great deal of excitement about it. One of the ways that you’ve discovered to fund it is to bring back the idea of incentive prizes. It seems like a great idea, the way we see it working out, but how come some of the other massive game changers, people out there like Bill Gates, who is trying to solve malaria in Africa, don’t seem to buy into that? What do they know about incentive prizes as a method that maybe the rest of us aren’t seeing?
Peter Diamandis: I know Mr. Gates, and he and I have had many debates over lunch and conversations about this. Incentive prizes work extraordinarily well, and we’ve seen a rebirth of incentive prizes over the last few decades. If you think about it, a thousand years ago, the only people who could solve a problem on a local or regional basis were the kings and queens. Hundreds of years ago, it was barbarians who could build libraries, railroads, steel mills, and schools. Today, any of us who truly care about solving a problem can. We’ve democratized the ability to impact the world because of the power of tech, because of the availability of capital from angel funding, crowd funding, and venture funding. My belief is that you can choose a foundation, you can fund a particular entrepreneur to try and solve a problem, or you can say, “Listen, here’s the problem. The first person to accomplish this, and here’s the very specific goal to build this device, wins the cash.” You can have not one or two or ten. You can have hundreds of entrepreneurs competing to solve it.
There’s the XPRIZE foundation, which is www.xprize.org. We’ve just created a platform called www.herox.com, which is a platform where you can design and launch a prize, and the crowd can help co-fund it and compete for it. These are the things that I think are very important. Governments, and in some cases traditional foundations, where I would put the Gates Foundation, really want to have more control about where their money goes. They want this entrepreneur to be the person. They want to pick where the capital goes, and that’s fine, but it limits your solutions. The day before something is truly a breakthrough, it’s a crazy idea and a lot of us don’t back crazy ideas. We say, “This sounds like a logical solution,” and you fund that, but that’s limiting the solution to your pre-conceived notions of what the solution can be.
Douglas Goldstein: How can people follow you, follow your work, and get excited about future abundance?
Peter Diamandis: If you go to www.diamandis.com, I have a blog I put out every Sunday. I have a newsletter called Abundance Insider that really curates the extraordinary positive news in the tech field happening every week. You can sign up for www.singularityu.org where you can learn about the programs we run for executives for the public, and what we’re going to be doing in Israel hopefully at the end of 2016. Go to www.xprize.org to learn about the XPRIZEs and www.herox.com if you want to design your own incentive competition and launch it. You can do it there. There’s a lot going on, and I’m excited to have people learn about the extraordinary positive news in the march of technology. It’s how it’s changing our world.