30 Oct 2013

HiddenLevers War Room
Macro Coaching
Archived webinars
Presentation deck
Scenario Updates
CE Credit
Idea Generation
Open Q + A
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War Room
I.
Technology = Disruption
II.
Technology Sector Activity
III.
Scenarios
- Historical – 1990s Tech Boom + Bust
- Forward Looking

HiddenLevers
TECHNOLOGY = DISRUPTION

Disruption
An innovation process where cheap, low-quality products ultimately displacing expensive, high-quality products.
Disruption typically ruins the prospects of organizations caught on the losing side.
Qualities of Disruptive technology
1. much cheaper + easier to use
2. improve at a rate much faster than the competition
3. performance satisfies most demanding uses
4. New technology dominates

Disruption transforming all industries
AUTOMATED DESTROYED CREATED
Hotels +
Travel
Brick n Mortar Video 3d Printing Gene
Sequencing
Printing
Floor Trading
Industrial +
Manufacturing
Big Data
Wired Telecom
Professional Services
Mobile Apps
Meter Reading

Moore’s Law, and its Long-Term Implications
Moore’s Law: number of transistors on a chip doubles every 18 months
Implications:
• Your phone is more powerful than a 70’s supercomputer
• Computers are steadily acquiring human capabilities

Does Tech Enable Job-Free Growth?
Productivity grows, but not employment
Unemployment drops, but no one rejoins work force

Where are displaced workers going?
% of workers on SS
Disability doubled since 1980
Low wage jobs growing fastest

Goodbye Middle Class. Hello Tech
Left
Lower wage jobs dominate the recovery, though higher wage jobs are holding their own
Right
The middle class is shrinking steadily, with job automation playing a key role source: NELP, Alan Krueger via Huffington Post

Tech = Disruption – Recap automation = C U L8R middle class successful tech = disruption income disparity will only worsen structural unemployment

HiddenLevers
TECHNOLOGY SECTOR ACTIVITY

VC Market Overview – Where and What?
VC deals still dominated by software, followed by biotech
California dominates - 46% of all VC funding in 2013 sources: PWC Moneytree , Steve Blank

VC Market Overview – How Much Money?
VC funding actually higher in 2011-2012 than today
Could VC trends be frontrunning public markets?
sources: PWC Moneytree , Steve Blank

VC Market Overview – Mark to Mystery
Twitter, Pinterest, and Snapchat command huge user bases – challenge is monetization
Snapchat specializes in disappearing content – makes advertising more difficult
All of the above rely on digital ads as business model – can the advertising business sustain GOOG and all the rest?
source: Wall Street Journal

Winners - Four Horsemen
YTD, over $80B has been added in market capitalization.
Tesla disrupts automotive and dealership models.
Netflix threatens cable with original content
& streaming.
Facebook and
LinkedIn show strength of large social networks.

Winner - 3D Printing
Source: LA Times 8 March 2013
DDD and SSYS major players.
VJET & XONE had 2013 IPO.
Key patents expiring
February 2014 –
More growth?
Hewlett-Packard announced 2014 entry into 3D printing.

Winner - Cloud Computing
Players:
Dropbox,
Evernote, Drive, iCloud.
Here to stay long-term. 36% annual growth.
$200B market
Network security & NSA monitoring are concerns now.

Loser - Brick and Mortar
Borders gone,
Barnes & Noble shrinking.
Online shoppers killing big box stores
Office Max
Office Depot desperation merger
Source: USA Today Business Insider

HiddenLevers
TECH BOOM OR BUST – SCENARIOS

Tech Boom or Bust – Historical Scenarios
90s Tech
Boom
1995-99
Dot Com
Bust
2000-02

90s Tech Boom
550%
200% source: HiddenLevers
Four Horsemen – high flyers, ushered in end of days
Fed hiked rates
6 times in 1999-
2000. Target rate 6.5%
No rise in defensive equities (soap, food)
S&P up 26% annually, for last 50 months of bubble
+4000% +1200% +8000% +1400%

Dot Com Bust
Priceline went from 1000 to 7
Yahoo bought
Geocities for 5b
Markets followed in 2001
Brutal landing in
Four Horseman
Nasdaq came back in line with S&P source: HiddenLevers
CSCO
MSFT
DELL
INTL
-88%
-63%
-69%
-74%

Scenario: Tech consumes the world

Scenario: Tech consumes the world
2013: Reasons it’s different angels succeeding now came from 90s
IPO boom no spillover effect between tech + telecom serious tech dynamism being unleashed, not just dot coms
Defensive equities best start in 2 decades global dimensions, not just US organizational overhauls involve digital innovation private market runs most of the money flow source: MSN

Scenario: Tech consumes the world
Hints of 1996
Facebook rebound
Netflix rebound paradigm shifts smartphones photos analytics source: Marketwatch , Moscow News
Autotrader.com
2001: 47m loss
2013: 62m profit
Apple rebound
Priceline dominance in hotels
Amazon
Web Services
Priceline first
S&P 500 company at
1000/share

Scenario: Dot Com Déjà Vu
Facebook IPO.
(enough said)
FB Instagram purchase was done in 1 day
Elon Musk says
Tesla overvalued
1 car on fire showed Tesla speculation source: HiddenLevers, NY Times , ValueWalk , CNN Money , SeekingAlpha
Four Horsemen – current Nasdaq outperformers, leading way to hell?
2013
Nasdaq +20%
4HRSMN +230%

Scenario: Dot Com Déjà Vu
2013: Reasons it’s the same
Lackluster due diligence
Big companies buying their way into relevancy major tech innovations end in speculative frenzies
Bungled IPOs leading to disappointment
Doubts about economic returns of innovation
Increasing size of early funding rounds source:

Scenario: Dot Com Déjà Vu
Hints of 2000
Groupon hijinks turning down 6b
Repositioning
Firing founder
Color – 43m in first funding round, now bust
Class actions against Zynga
S&P annual gains since
March 09 match dot com era
Corporate profits up
20%/year since
2009
Square versus
MasterCard
Pinterest
1/3 valuation of
Twitter with no revenue
Priceline double top at
$1000/share
Solyndra = Fraud tainting green tech altogether
Yahoo buying
Tumblr for 1b, no rev for years source: NY Times

Tech Boom or Bust – Future Scenarios
Jury’s Out
Tech
Consumes the World
Bad
Dot Com
Déjà Vu

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