At the Gartner Symposium 2013, Gartner Senior Vice President of Research Peter Sondergaard said, in his keynote address, that “every company is a technology company.”
Although that’s the earliest reference I could find, Sondergaard probably wasn’t the first person to say that … and he was far from the last.
A quick internet search gives me 35,000 results on “every company is a technology company.”
That phrase has become not just a cliché, but a mantra for Silicon Valley journalists, futurists and venture capitalists, not to mention every huckster out there trying to fund his juicer company.
It makes sense at first. After all, every company needs technology to develop, manufacture, market and deliver its products.
Plus, the companies that employ the best technology often come out on top in their field, even if their products aren’t the best.
But here’s the thing …
Not every company is a tech company.
In fact, very few companies are.
And in order to invest in and profit from Silicon Valley’s exponential progress, you must be able to tell the difference.
Today I’ll show you how …
When Apps Replace Airlines
To get started, let’s rewind the tape to last Friday.
DocuSign develops electronic-signature software apps. United Airlines … well, I’m fairly certain you know what it does.
The Nasdaq 100 has always been tech-heavy, but DocuSign’s arrival helps demonstrate just how dominant technology has become … and how much wider the Technochasm could get.
Some “experts” out there might argue that United is a tech company. After all, its jets are packed with efficient high tech that reduces fuel use, increases speed and makes flights safer. And it surely uses the most sophisticated software out there to help it book seats and manage arrivals and departures.
But at the end of the day, United’s business is still packing passengers into steel tubes and flinging them across the globe. It’s got to pay for those planes and their upkeep … and for terminal space and landing rights. It employs tens of thousands of people — 93,000 at last count — to fly its planes, manage its operations and serve as flight attendants.
DocuSign, on the other hand, is a true tech firm. It simply develops and markets its e-signature software — and then collects monthly checks from its customers as they rent out its software apps “as a service.”
To do that, it employs fewer than 4,000 people.
Moreover, DocuSign has benefited from the coronavirus, as people who needed to sign documents but couldn’t meet in person discovered the service.
“Even when the COVID-19 situation is behind us, we don’t anticipate customers returning to paper or manual-based processes,” CEO Dan Springer told analysts on a conference call.
Still, it’s a bit shocking that 17-year-old DocuSign has a market cap of nearly $30 billion, while United, founded in 1926, is valued at just $11.3 billion.
Let’s look at another example … this time at a couple of startups whose potential IPOs, pre-COVID-19, many investors were salivating over.
WeWork designs, builds and rents out office space for high-tech startups. It bills itself as “the future of the workplace”… and presents as a tech company. In fact, WeWork infamously enticed Japanese billionaire Masayoshi Son to shell out billions through his tech-focused SoftBank Vision Fund.
But I don’t care how many high-tech gewgaws WeWork stuffs into its “workplace” or how many TED talks its executives do.
It’s not a tech company. It’s a real estate company.
So, not only does WeWork suffer from the tech startup-typical lack of profits, but it also carries the heavy costs of owning real estate. No wonder it is now crashing and burning so spectacularly.
Airbnb, at first look, also sounds something like a real estate company. It helps folks find a place to stay while they’re out of town on business or vacation.
Of course, Airbnb doesn’t own any real estate. It develops and operates a tech platform that connects property owners with would-be travelers.
Airbnb employs about 6,300 people. At its peak, WeWork employed as many as 15,000.
And that is how you distinguish a tech company from a non-tech company. Tech companies develop, market and deliver technology. Everyone else uses technology.
Bad Investments … Not Bad Companies
That’s not to say United Airlines is a “bad” company and DocuSign is a “good” one.
We absolutely need airlines.
Like I said here last Saturday:
“Our economy will always feature a wide array of enterprises — some of which require intense human interaction, and some of which require no interaction whatsoever.
A restaurant will always be a restaurant. It can’t ever be a video game. A music festival will always be a music festival — never an iPhone app.
Farming will never become a virtual, online activity, no matter how technologically savvy we become. Perhaps squads of robots and drones will one day grow and harvest acres of corn, but they would still need seeds, soil and water to do the job.
In other words, the Technochasm phenomenon does not imply that any one profession or industry is better than another. It merely highlights the vulnerability of non-tech-based professions and industries, relative to their tech-enabled counterparts.”
Thank goodness someone is attempting to make money at restaurants, farms and airlines. Our lives would be so much less without them.
But that doesn’t make them good investments.
Invest in Tech Itself
So when I say you need to get your portfolio on the right side of the Technochasm, I don’t mean to invest in companies that use technology.
I’m encouraging you to invest in the tech itself … in the companies that develop the best software, semiconductors, sensors and online platforms.
The United-DocuSign switcheroo is just another firsthand example of how exponential technological progress has rewarded technologically savvy companies and visited destruction on those that are slow to adapt.
For my No. 1 current tech stock recommendation, and perhaps my next 1,000% winner, go here.
P.S. I’ve identified four tech companies I think you should buy right away to capture the biggest gains in the market going forward. You probably haven’t heard of a single one of these stocks … but each of them could potentially become my next “10 bagger.” In my new presentation, I’ll tell you how to find out more about them. Check it out here.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.