Disruption and the future of economic growth

Coverage of the 2014 Global Investment Conference

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green shootsGrowth can be tricky for investors to spot. A growth stock quickly becomes a blue-chip stock—if it survives—and remains in business more by managing the bottom line than by expanding top-line revenues. True growth—which sees smartphones displace desktop computers—generally involves technologies that are hardly mainstream today, but may well be tomorrow, thanks to startups with disruptive technologies. The final session of the conference focused on economic opportunities arising out of disruption. During our Forum for the Future, we heard from three thinkers whose ideas and technologies could change our lives for the better.

We started by discussing bitcoins, a virtual currency that has gained a certain amount of notoriety. What is missed is its infrastructure, said panelist David Kinitsky, general manager of the Bitcoin Investment Trust. The existing “rails” for international money transfers are 30 to 40 years old, he points out, and are “pretty poor, pretty expensive and not very timely.” Bitcoin technology affects not just immigrant workers in industrialized countries sending remittances home, but, “in terms of the unbanked and unbankable segments of the world, whether it’s in Africa or Latin America, this is a way for them—just like they’ve jumped past landline telephones to mobile phones—to potentially bypass brick and mortar banking.”

A camel with a solar panel strapped on its back lugging a refrigerator is the image that panelist Nanxi Liu, founder of Nanoly Bioscience, features on her website. Inside the refrigerator are vaccines. Since traditional vaccines must be refrigerated, the image highlights the inherent challenge in getting vaccinations to huge areas of the globe, where refrigeration is absent. Liu uses nanotechnology to coat the protein molecules in the vaccine with polymers—hydrogels  that are resistant to heat but dissolve in light. This cuts out the need for refrigeration altogether—and opens up new pathways for the vaccines to get to those in need.

But, equally important, “what differentiates our technology, which we call a nanoshield, is that we don’t need to reformulate the vaccine,” thus avoiding regulatory complications, since “every reformulated vaccine would also have to go through the Federal Food and Drug Administration.”

The result is a 60% savings on a drug that costs five cents to manufacture but sells for $1.95 after all the intermediary costs, including transportation.

While current regulation creates costly obstacles, future regulation may create dead losses for fossil fuels, said panelist Tom Rand, managing partner at MaRS Cleantech Fund ILP. For conventional oil companies, “we need to leave roughly two-thirds to three-quarters of fossil fuel assets stranded in the ground” to prevent a global temperature rise of three degrees. That means that 100% of exploration budgets for incremental reserves are wasted.

He suggested that “there are ways of energy production and energy storage and biofuels that are capable of competing with fossil fuels head-to-head on a cost basis, and on a reliability basis, that don’t require subsidies.”

Growth is about change; change is disruptive. Investing in it can be disruptive too.

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