Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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RIDING A BLIND TIGER

From its first commercial use in the 19th century, electricity changed society in ways that were not predicted. In a New York Times article, Jack Ma, founder of the Chinese e-commerce company Alibaba, called data the “electricity of the 21st century”.

Early electricity innovators such as The General Electric Apparatus Company traded in “everything electrical” from home appliances to heavy engineering. Households benefited from electric lights while industry harnessed electricity to increase productivity and profits. The world was forever changed.

Ma’s recent comment infers we’re participating in a similar social transformation today, which has fuelled speculation on how our lives will change, or be changed, through the exchange of digital information across the internet.

Unlike the dot.com phenomenon at the start of this century, the current theory is that businesses which harvest, store and manipulate data through e-commerce and social media platforms, will have the ability to target people and influence their behaviour as digital consumers of goods and services.

The surge in the share prices of global companies operating in the e-commerce and social media sectors has been spectacular in 2017 and appears to confirm this theory. For example, at the time of writing Alibaba’s share price is up over 90%, Facebook over 40% and Apple over 30%, in US$ terms, YTD.

Few would disagree that the use of digital technology has transformed people’s lives. However, it’s less clear whether or not this change has been positive. As one example, the World Economic Forum’s “Implications of Digital Media” survey found that only about one-quarter of respondents from Germany and the US thought that digital media has improved the quality of their social, professional and overall lives.

As with all change, there will be pluses and minuses. On the one hand, digital media is boosting productivity and facilitating growth in social networks, on the other it can alter human decisions and pose risks to civil society. The Massachusetts Institute of Technology suggests that over time people will narrow the stream of information they share on social media, a phenomenon known as the “spiral of silence”.

In famously describing himself as “a blind man riding a blind tiger”, Jack Ma suggests that the pace and direction of technological change carries substantial and often unknown risks. While investors in the latest technological phenomenon can be assured of the transformational change arising, they will need to remain vigilant that the degree of anticipated transformation does not become separated from reality.

Gordon Noble-Campbell
Director, Private Client Services