We are also in the very early period of AI deployment to end users. Consider autonomous vehicles, which basically are intelligent cars. Waymo, the autonomous vehicle subsidiary of Alphabet, operates in a handful of cities including Phoenix, San Francisco, Los Angeles and Atlanta. Waymo has a strong safety record in those cities, but has a long runway ahead as they launch in places like Miami or New Orleans.
Over the next decade, I expect AI technologies will become pervasive in most software products, most hardware products, and we will be using all sorts of robots. The ride from here to there will be bumpy, and while investors can expect alternating bouts of disappointment and euphoria along the way, I do expect intelligent systems to become ubiquitous throughout our economy.
From cold hard cash to digital payments
The transition from the use of paper money, coins, and checks to digital payment technology has been ongoing for a few decades. PayPal, for example, introduced an online version of its payment technology in 1999 and released its mobile app nine years later.
The pandemic in 2020 acted as a powerful accelerant of this trend toward digital payments in the US. With physical distancing and lockdowns limiting in-person commerce, consumers and businesses rapidly embraced contactless and remote payment options. More recently, 90% of US and European consumers said they used some form of digital payment in 2024, according to a McKinsey survey.
This trend toward digital payments is something I expect to continue for much of the rest of our lives. Today, the digital payments ecosystem includes a broad range of offerings, from mobile wallets that integrate with other systems like Apple Pay and Alphabet’s Google Pay, to consumer and merchant platforms like PayPal, Square, and Stripe. Legacy financial firms Visa and Mastercard have evolved from credit card networks into global digital payments giants that provide the infrastructure enabling secure digital transactions.
Cryptocurrencies like Bitcoin remain controversial in many corners of the investing universe, but the rapid rise of Bitcoin’s value in recent years is a sign of its growing acceptance and popularity with investors. In March, the US administration said it would establish a Bitcoin strategic reserve, and other major central banks were exploring or developing their own digital currencies. I have been studying cryptocurrencies for years, with a focus on Bitcoin, which has been the best-performing asset class over the last five-, 10- and 15-year periods. Gold holds value because it is scarce, but Bitcoin is even scarcer as it never increases in supply.
From harmful tobacco to reduced harm nicotine
Not all unstoppable trends are based on digital innovation. According to the World Health Organisation, about 1.3 billion people still smoke tobacco,. They light tobacco leaves on fire and inhale the smoke to consume nicotine. But that nicotine comes with a payload of carbon monoxide and tar, which can cause cancer and other diseases that shorten your life.
We are now seeing a transition from harmful smoke inhalation products to less harmful ways to consume nicotine. These include products that heat tobacco but don’t burn it, vaping products that cause you to inhale vapour rather than smoke, and oral nicotine pouches like Zyn that are placed between your cheek and gum.
While the number of smokers in the world has been declining, the number of people using vape pens and pouches has been growing. I believe this is also an unstoppable trend that will continue for years. If so, e-nicotine producing companies could benefit.
Lessons learned
When I consider the unstoppable trends i have observed over my career, I have learned that the key to investment success is to understand the new trend and how it will change the competitive landscape and try to identify the likely winners and losers.
Each of these shifts has featured disruptors, the disrupted and adapters. For example, within the retail industry, Amazon rose to be a giant in e-commerce, the Borders bookstore chain filed for bankruptcy before being acquired by Barnes & Noble, but other landed retailers like Target were able to adapt by shifting to a multichannel business mixing e-commerce and in-store shopping. Within media, Netflix has grown from a business renting DVDs by mail to a streaming powerhouse while the Blockbuster video rental chain went out of business. In the years since, a number of streaming services have emerged, some offered by traditional networks.
It’s no easy task, but the key to determining the likely winners and losers is fundamental research. Gain a deep understanding of a company’s business plan. Assess whether management has the wherewithal to execute the plan. Evaluate the competitive landscape with an emphasis on companies that are poised to take market share. Use all of this information to separate the disruptors from the disrupted. And remember, it is possible to overpay for growth, so it is always important to keep valuations top of mind rather than an afterthought.
