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How Covid-19 Exposed America’s Digital Divide

Coronavirus problems have highlighted the technochasm

Back in 2016, I joined in on a “gentleman’s bet” with some big Wall Street guys. Guys like Mark Yusko … David Einhorn … and Bill Ackman. These are guys who have hedge funds that are larger than the GDP of some countries.

Technochasm
Source: tungtaechit / Shutterstock.com

The bet was simple.

Each of us loaded up a model portfolio of stocks, and, at the end of the year, we looked at whose performed the best.

Now, these guys I competed against all have massive research departments … the fastest computers … and algorithms developed by quants. Meanwhile, I was sitting in my kitchen in a Northern California town that’s so small it has no stoplight and iffy cellphone reception.

Yet I outperformed every single one of them. In just three months, I outdid the S&P 500 by 12 times.

Source: Chart by InvestorPlace

For my win, I received a $44,000 “jackpot” (which I donated to a charity in Nicaragua), bragging rights and a great story to share in reports like this.

Obviously, I don’t let my personal “digital divide” slow me down. In addition to beating Wall Street legends from my kitchen table, I also run Smart Money and all my other investment services

That said, the digital divide — the gap between those who have ready access to computers and the internet and those who don’t — can devastate folks caught on the wrong side of it.

Up here in rural Northern California, the digital divide became clear after the novel coronavirus sent kids home from school.

Sure, most parents were able to shuffle their schedules and help their kids get into Zoom (NASDAQ:ZM) meetings and access work packets. But I was surprised to find out how many folks out here had barely functioning internet service … or no internet service at all.

After all, a lot of my neighbors work in agriculture. Residential internet service simply wasn’t a priority.

So while they were able to get by before with a cellphone and satellite television, the pandemic changed all that. It quickly exposed how damaging the digital divide can be.

After the coronavirus hit, folks with computers and fast, broadband internet connections could transition swiftly to a shelter-in-place lifestyle. Those without … couldn’t. And to make matters worse, many of the satellite and cable installers refused to make new connections during the peak of the pandemic.

A simple internet connection sometimes became the difference between successfully coping with the pandemic and not.

This digital divide is a “subsector” of the Technochasm between thriving, innovative tech companies and failing old-school companies we talk a lot about here. And like it has with the larger Technochasm, the Covid-19 pandemic has both exposed and widened the digital divide.

So today, let’s take a closer look at that digital divide — and at some ways you can make sure you never fall on the wrong side of it…

No Tech … No Future

More than 20 million U.S. households don’t have broadband internet access. That’s according to a 2017 U.S. Census Bureau survey.

Microsoft (NASDAQ:MSFT) data scientists say that’s an underestimate. According to the software giant, 157.3 million Americans don’t access the internet with broadband speeds.

The digital divide is widely considered a rural problem because internet service is so spotty out here. In fact, 21.2% of rural Americans — 5.1 million households — lack broadband.

That’s why, earlier this year, the Federal Communications Commission launched a $20 billion Rural Digital Opportunity Fund to connect up to 4 million homes and small businesses in rural America.

But the digital divide isn’t just a deployment problem. It’s just as much a consumer adoption and consumer affordability problem.

According to the Census Bureau, three out of every four Americans who lack broadband access have the infrastructure in their neighborhood but haven’t connected to it. And so, 15.3 million non-rural households lack broadband.

Consider Baltimore, where InvestorPlace is headquartered.

It’s just up the road from the nation’s capital. It’s home to Fortune 1000 companies like T. Rowe Price Group (NASDAQ:TROW) and Under Armour (NYSE:UA, NYSE:UAA) … and, Johns Hopkins, maybe the world’s best hospital. Fiber-optic cables and copper wires run under its streets. Cellphone towers dot its skyline.

Still, according to the Census Bureau, 57,000 households in the city don’t have broadband. My friends in Baltimore tell me that while school buildings were closed, parents and students set up camp near the city’s libraries to grab free Wi-Fi.

With the coronavirus showing no signs of slowing down in much of the United States, we’re likely to go through a lot of this again in the fall. Families will once again be forced to work and attend school online.

Just ask a teacher friend how this is affecting things. They might be able to do enough to make sure kids “graduate,” but they can’t give out grades or assign complex projects because so many students just don’t have good internet.

In the Technochasm, there is an enormous gap between tech stocks and the rest of the market. Tech companies make greater profits, stack up cash and keep on succeeding. The rest of the market gets left behind.

And in the digital divide, kids with internet access get to go to school, but those without broadband either have to work hard just to keep up … or get left behind.

Fuel on the Fire

No wonder it seems like a few people are accumulating fortunes while the rest are sinking below the poverty line.

In 1980, the richest 1% of Americans owned about 30% of all household wealth in the country … and the bottom 90% owned about 24% of all household wealth.

But by 2012, the share of all household financial wealth owned by the top 1% had skyrocketed to more than 60% … and the share owned by the bottom 90% had plummeted below 10%.

Source: Chart by InvestorPlace

Or, consider that right now, the richest 20% of households in the United States own a whopping 90% of the nation’s wealth.

Now that the coronavirus is killing old-school companies and rewarding high-tech firms, this wealth gap is only going to get larger … and larger.

And so will the digital divide.

The coronavirus is pouring fuel on the Technochasm fire.

But there is a way to make sure you and your portfolio are on the right side of the digital divide and the Technochasm.

I recently brought along a film crew to produce a special video presentation so I could show you exactly what’s going on … and why this is so important.

Take a minute or two to check out my on-camera segment, which we’ve posted on our website, here.

I’ll see you back here soon.

Regards,

Eric Fry

P.S. For two decades, CEOs and Wall Street billionaires paid me millions for trade research and ideas. Over 20 years, the peak highs from my top recommendations averaged out to 93% a year. But I’ve left all of that behind — and invited a small group to follow my work. For that small group, in just 10 months, I uncovered total gains of 987% (including the losers!). Today, I’m inviting a few more people join me. Go here to find out more.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/technochasm-how-covid-19-exposed-americas-digital-divide/.

©2020 InvestorPlace Media, LLC