GameChanger Investing by Hilary Kramer

Author:Hilary Kramer
Language: eng
Format: epub
Publisher: Regnery Capital
Published: 2020-01-06T16:00:00+00:00

Getting Disruption on Your Side

Every digital transaction feeds the blockchain ecosystem, starving conventional transaction networks that protect participants via signature, PIN, or other validation techniques. Those networks are ultimately going to need to buy or build blockchain capabilities to remain relevant.

And they’re all going to need computing power. That’s the first piece of the opportunity. IBM has the early lead on the programming to give would-be blockchain vendors a plug-and-play franchise, while NVIDIA and AMD make the chips that keep running the numbers. Alphabet has a front-row seat on the start-up end of the industry with a half-dozen interesting little companies in the portfolio. These aren’t pure plays, but they’ll catch the buzz.

You may think it’s a bit of a jump to go from digital transactions to small business, but hear me out. Depending on the day, there’s maybe $120 billion packed into the bitcoin universe, and it’s taken a decade to get there. Right now, small e-commerce vendors generate about $160 billion a year in sales for Amazon and another $40 million a year for Shopify. Ordinarily, we’d suspect a lot of that merchandise was pirated or simply never existed.

What’s exciting about this application of blockchain systems is that in theory any commodity, product, or even service can be linked to the line of transactions that represent its economic history. I’ve seen presentations from people who are building “smart” concert and sporting event tickets that are impossible to forge or scalp. If you try to break the embedded rules of resale, the ticket itself warns the buyer and could even alert the authorities.

The prescription angle can theoretically help stamp out opioid and other addictions by locking each pill bottle to the person who legitimately needs the medicine—while the pills themselves can still be traded or stolen, they can’t be resold on the network. An electronic lock on the bottle cap and a radio-frequency tracking chip, and even lost pills can be located, minimizing opportunities for abuse.

And once you’ve reached that point, there’s no reason to focus on the transactions in themselves. Blockchain tags have already been deployed to lock down merchandise in retail stores, with the sensors turning off if and when the tag registers legal sale. That same functionality can help freight companies protect inventory on the road, tying existing radio tagging systems into the network with an additional level of unbreakable security.

Every organization that stocks valuable physical products is going to want this capability. Overstock.com is farthest ahead and is now in position to start sharing its technology. Cognizant Technology Solutions has embraced consulting expertise to help management transform their processes in order to make it happen. If you’re betting on the future of the way we buy and sell things (not to mention maintain a reliable inventory), these are the stocks I’d start with.

Wherever money moves, it will increasingly be digital, whether that’s in a “crypto” blockchain-encrypted environment or via conventional, heavy-security credit and debit transfer networks. The payment stocks often lead Wall Street for a reason.

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