Growth opportunities for investors in the years ahead will be led by the power of the second chapter of the internet and cloud-based industrial revolution, according to Fraser Thomson, client services director, Baillie Gifford American fund.
The internet has permeated every aspect of our lives for decades, to the point some investors may question how it can be still labelled a disruptor. For Thomson, however, we are only at the end of the first stage of developments in IT-related change.
Looking at the drivers of corporate growth in the years ahead, Thomson referred to Peter Drucker's ‘seven sources of innovation'. The most important of these, he said, is industry structure as a source of innovation. Shifts in the foundation of industry don't happen that often but when they do they tend to affect everything that is built on top of them.
That is what is currently happening with the internet and cloud computing; the internet as the infrastructure upon which commerce, media and information flows, and the cloud as the infrastructure upon which IT is stored, organised and distributed.
Thomson believes a massive changeover is underway, far beyond the current applications of the technology, which will push forward the internet-based industrial revolution we are living through right now, and will have a huge impact on investors taking a five to 10 year view.
According to Thomson, we are at the end of the first innings of the information technology revolution, but are about to enter a much broader deployment of this technology across all facets of society and industry and the economy.
The work of British-Venezuelan economist Carlota Perez talks about this; she has looked at every industrial revolution since the 1700s. It is her contention, which Thomson agrees with, that we are in the fifth industrial revolution right now, underpinned by information technology.
Thomson said he is seeing businesses pop up all across his investment universe using the internet or the cloud as their competitive edge over an incumbent set of participants. This gets really exciting, he said, when he sees previously undisrupted parts of the market be affected by these dynamics.
Thomson predicted this will be something that accelerates over the next few years. Despite us thinking we have a really good grip on the internet and the cloud, this is something which is still materially underappreciated by investors, which is really exciting, he said.
