How to Invest in the Singularity – It’s Near
If you’re reading this then the odds are that you’re probably in a high income bracket. We don’t control these things, that’s just what our metrics tell us. If you fit that demographic, that means you may have a private wealth manager who manages your money. If that individual suggests an optimal allocation across low-fee index funds, then you should probably just use a robo-advisor. If that individual tells you to make active stock selection bets, they’re probably taking you for a ride. We say that because active managers have a horrendous track record when it comes to beating benchmarks- like 80% fail at it. WTF are you paying them for? Probably this.
One thing that we’ve learned over the years is that a key factor in predicting the success of any given technology startup is by looking at the caliber of venture capital firms that invest in it. Venture capital firms have the resources and subject matter expertise needed to evaluate new technologies and most importantly, determine if they are economically viable. This “follow the money” approach can also be used in retail investing, with Warren Buffet being perhaps the best example of this.
While writing our recent article on Softbank, we learned about their $100 billion investment fund allocated to spending on emerging technology companies in the next 5 years. To put that number in perspective, the entire global venture capital “industry” is only $65 billion in size. When you hear about that much money being invested, you can’t help but wonder what their strategy is. Why? Because as retail investors, we’d like to pursue that strategy ourselves. To figure this out, we watched a 30-minute talk given by Masayoshi Son, CEO and Founder of SoftBank, so you don’t have to. What we learned was very insightful.
Mr. Son starts out his talk by saying he wants to share his 30-year vision (love the Japanese inclination towards long-term planning). He asks who knows what “the Singularity” is (about half the audience). The textbook definition is “the hypothesis that the invention of artificial superintelligence will abruptly trigger runaway technological growth, resulting in unfathomable changes to human civilization“. Mr. Son simply said “this is when computers surpass mankind brain” and he expects that in under 30 years. Time Magazine says about the same thing:
So we continue. He talks about average IQ being 100 and then later says he hopes the room has an average IQ of a little bit more than 100. People giggle. He says in 30 years a single chip will have an IQ of over 10,000. Did you know that neurons in your brain are binary? They assume on-off states to store information, just like transistors in silicon chips do. Mr. Son says people’s brains have 30 billion neurons (but it’s probably closer to 100 billion):
(Facts people. It’s the era of “fake news” and we always need to be on point.) So anyways, every human brain is equipped with roughly the same hardware and that’s not changing anytime soon. So, for us to get to an IQ of 10,000, we’d need roughly the capacity of 3 quadrillion transistors – a billion is (109) and a quadrillion is (1015). So, we can extrapolate that out based on what we know today about transistor growth and it tells us that the “birth of super intelligence” is expected to happen in 30 years.
It’s at this point in time Mr. Son provides the foundation of his strategy in a very endearing way that all but requires us to stop translating his Engrish and just quote him verbatim:
So this super intelligence, built in, integrate into the robot, smart robot, m’kay. We have PCs. We have smartphone, they don’t move, but if those super intelligence goes inside, the moving device. Robot, m’kay. Then the world, our lifestyle, dramatically changes.
Mr. Son expects the population of smart robots to surpass human population in 30 years and then he goes on to talk about the explosive growth of IoT devices. He says that the chip maker he acquired last year, ARM Holdings, is expected to ship over 1 trillion IoT chips in the next 20 years with ARM IoT chips commanding an 80% market share. This will allow him to plan the future direction of IoT which will also influence the direction of AI significantly:
He remarks that during some time in the next 30 years, the 2 chips in each of your shoes will be more than twice as smart as you are – and you will step on them every day.
He then says that the intelligence is not just at the client level (edge computing), but also connected in “the cloud”. All of those connections, lead into the “super intelligence” collective. Now that he has ARM, and therefore all the hardware for “the Singularity”, he has two main focuses:
He talks about how one of his engineers was waiting for his wife at lunch time and hacked 1.2 million security cameras. This is why we need to start thinking about IoT security. (See our article on 19 Internet of Things IoT Security Startups). Today, your average car has over 500 ARM chips:
“None of those chips are secured today by the way” Mr. Son says. He knows because they’re shipping and he shows a video of a Softbank engineer taking control of a car by hacking it. The engineer is able to keep the car from braking and also turns the steering wheel. Mr. Son then talks about how all cars today are now connected to “the cloud”. (See our article on 10 Connected Car Technology Startups). Softbank is working right now on securing all their chips. They’re also working on low-power connectivity for all their chips. He then talks about how all of the infrastructure in society will be connected, including your home.
The conversation then goes on to talk about how the Softbank Vision fund now owns Oneweb. (See our article on Branson’s OneWeb: Cheap Satellite Internet Anywhere). In the past, satellites were far away at around 22,300 mile in elevation. Oneweb satellites are 30X closer to the earth at 745 miles high. OneWeb plans to shoot 800 satellites into orbit in the next 2 years and eventually increase that number to 2,000. All those smart devices can now communicate at speeds of 200 megabytes per second down and 50 megabytes per second up across the entire surface of the globe. He expects to have 1 billion human subscribers on that infrastructure.
He then reinforces his absolute certainty that the Singularity is coming in 30 years and pivots into a “good or bad” discussion. A bunch of smart people at Oxford came up with 12 threats to the world and AI was one of them right alongside things like nuclear war and super volcanoes. He says that AI could actually be the solution to the other 11 threats. It’s up to us whether or not we choose to use super intelligence for good or bad. The time is now and we need to act fast.
While watching this talk, we couldn’t help but think we were looking at an Asian version of Steve jobs. It’s not just because they dress the same:
It’s because these two gentlemen are both visionaries, and Mr. Son’s vision is picking up from where Steve Jobs left off and looking 30 years into the future.
So back to our original thoughts about “following the money”. What can retail investors do here? Well, we’ve shown you before how to make diversified investments in cyber security, and in robotics. These two themes follow Masayoshi’s thesis very closely. We’ve also looked at a few companies to make bets on AI chips with; NVIDIA and Xilinx. (Masayoshi himself is buying NVIDIA as we speak.) There’s also a very compelling investment thesis in Softbank itself.
The Singularity is coming in the next 30 years and Masayoshi Son has shown us his strategy. Ignore all the background noise and you’ll realize that in fact it’s a very exciting time to be alive. We may also have an unprecedented opportunity to make money as investors but that comes with risks. Masayoshi Son himself will tell you that, having lost $70 billion in the dot-com crisis. The difference this time though is we’re not talking about e-commerce. We’re talking about one of the most fascinating scientific concepts that has pervaded science fiction for decades. We’re talking about investing in “the Singularity”.
Tech stocks are volatile investments during the best of times. Here at Nanalyze, we complement our tech holdings with a dividend growth strategy that performs extremely well during recessions. Find out which 30 dividend growth stocks we're holding in the Quantigence report freely available to Nanalyze subscribers.