Editor's note: Today in Empire Financial Daily, our friend and colleague Brian Hunt – the CEO of our corporate affiliate InvestorPlace – is back... As he said yesterday, "software programs are the oil of the 21st century." Today, Brian continues the discussion to explain why we're on the verge of a historic new information age that will change the world forever – one that will alter the trajectory of the human race...
Why Software Is the New Oil By Brian Hunt  Yesterday, I said that software is the new oil...
One big reason for that is because software businesses employ the power of scalability in a way few other businesses can match. Scalability is the ability of a business to massively grow revenues while minimally growing the costs associated with producing those revenues. For example, a lawn-mowing business is not scalable. If you own a lawn-mowing business and want to double in size, you'll have to buy twice as many lawn mowers as you have now, and you'll have to hire twice as many lawn-mower operators as you have now. Because of this, your revenue cannot soar far beyond your costs. On the other side of the spectrum, you have software businesses. Once you spend the money to create a useful software product or service, you can sell copies of it to the whole world at very little additional cost. This often leads to giant profit margins and giant market value appreciation. It took a lot of work in the early days to create the technologies and businesses behind software leaders like Microsoft (MSFT) and Oracle (ORCL). But once they were created, these two businesses could add new users and increase their revenues much faster than they increased costs. Their market values exploded higher as a result. Software-powered firms like Meta Platforms' (META) Facebook, Twitter (TWTR), and Microsoft are 'hyperscalable'... Put simply, a hyperscalable business is a business that can grow 10, 100, or even 1,000 times larger in the span of just a few years. They are the Holy Grail of business models. Thanks to ubiquitous connectivity and digital delivery, once these firms create a hit service, they can add millions of new customers in the span of weeks. They can 10x their revenues in less than a year. Software companies also typically employ a one-to-many business model... which is far, far better than a one-to-one business model. A one-to-one business model is the kind of model employed by many old, traditional companies. To sell one extra car, General Motors (GM) has to make one extra car. To sell one extra ton of steel, U.S. Steel (X) has to make an extra ton of steel. To sell one extra washing machine, Whirlpool (WHR) has to make one extra washing machine. In other words, these traditional manufacturers can sell one unit of production just once. But hyperscalable businesses employ a one-to-many business model. Once they create their core technology platform, they can sell the service it provides over and over and over. To generate an extra million dollars in revenue, Alphabet's (GOOGL) Google doesn't have to make any new things. Same with Microsoft, Twitter, and Slack. Instead of selling one unit of its product or service once, the hyperscalable business sells one to many. This results in much, much higher profit margins and rates of business growth. This results in astronomical success stories like Shopify (SHOP), DocuSign (DOCU), Airbnb (ABNB), YouTube, and Instagram. You'd be hard pressed to find a business that has generated more giant stock market winners that occurred in relatively short time periods of time than the software business. You could think of the software industry as a college sports team that produces more future All-Stars than any other college team. Maybe there's something in the water (hint: it tastes like scalability). It's one thing for me to tell you about the power of the software business model... But let me show you its power as well. Below is a chart that plots the performance of the major software stock exchange-traded fund ("ETF") – the iShares Expanded Tech-Software Sector Fund (IGV) – versus the performance of the benchmark S&P 500 Equal Weight Index over the past decade. The equal-weighted S&P advanced 180% over that time frame. Meanwhile, the software fund – full of scalable, high-profit-margin software stocks – advanced nearly 360% during the same span. Despite the big drawdown this year, software stocks have still outperformed the broad market's gains over the past 10 years... Because software programs do such a wonderful job of allowing us to collect, store, display, analyze, protect, and transfer information, they free us up to spend money on things we truly enjoy... They free us up to spend more time with family and friends... They have saved humanity billions of years of time... and mountain-sized amounts of frustration. And that is why we are so willing to buy computer programs and pay for the value they create. It's why we assign so much value to those businesses in the stock market. It's why the owners of those businesses grow very rich in very short amounts of time and become the world's richest people. It's why the ability to collect, store, display, analyze, protect, and transfer information is the oil of the 21st century. I've taken the time to show you the mind-blowing power of software because I believe we are on the verge of a historic new information age that will change the world forever... It's one that will alter the trajectory of the human race. As this revolution transforms our world, it will create one of the biggest wealth-building opportunities of your entire life. The coming revolution will see the rise of a whole new information industry – totally different than the one we know today – that will mint millionaires and billionaires at incredible rates. The software era from 2000 to 2020 made the Google founders, the Facebook founders, and the Microsoft founders some of the richest people on earth. It made millionaires out of employees and shareholders. This new era will see the rise of a whole new group of information billionaires and millionaires. The software era from 2000 to 2020 made Google, Facebook, and Microsoft among the most valuable, most powerful companies in human history. This new era will do the same for companies you haven't heard of yet. This new era will see the rise of a whole new group of trillion-dollar information powerhouses. The good news is that we are in the very early stages of this incredible new information age. You can still get in on the ground floor of what will go down in history as one of the biggest technological revolutions in history. Because this revolution will take hold during the 2020s, we will exit this decade a different society than when we entered it. Regards, Brian Hunt
July 13, 2022 Editor's note: The rise of a little-known type of tech company could change the way you shop, travel, communicate, and more... And this year's sell-off is giving you the chance to buy the stocks of the beneficiaries of this massive change on the ground floor for 1,000% potential. Most people won't hear about it until it's too late, but don't be one of them – get the details here. | 
Tidak ada komentar:
Posting Komentar