Disclaimer right up front, but this has nothing really to do with small caps, investing or the JSE. Well, nothing in the short-term, but probably everything in the long-term. This week has been quiet on the small caps news front, so it has given me some breathing room to philosophize and an interesting line of thought struck me... (thud!)
Most people know what you mean when you talk about "Frankenstein". Frankenstein was published in 1818 and became the benchmark against which all mad scientist and scary monster tales have been pegged.
In a nutshell, Frankenstein is a story of a scientist who patches together a monster (called Frankenstein) and then gives him life. The monster is not non-living, but it also isn't human. First the reader feels that the monster is just that, a monster, and thus the reader sides with the humans in the story. But, slowly, the monster displays more humanity than the humans in the story.
Thus, the defining theme in Frankenstein is actually asking the pertinent question: what makes us human?
I am no English major (as the many grammar and spelling mistakes on this blog prove!) and no literary genius, so take my understanding of Frankenstein with a pinch of salt. That said, it is an interesting contemplation of what exactly is the defining point that if you cross it you are now human?
Back in 1818, King George III sat on the English throne while Lord Liverpool was the current UK Prime Minister. I am also no historian, but one can see that this was a very (very!) different world to our current world of always on social media, democracy, and technological revolutions across arab-Africa...
Skip forward to a manga (Japanese comic books) called 'Ghost in the Shell' that was brilliantly adapted to a full-length anime (Japanese animated movie) of the same name (see here). While the manga was written in or around 1991, the movie came out in 1995 and, in fact, like all great writers, precedes many modern themes that we have subsequently seen Hollywood pump out.
Ghost in the Shell's plot is extreme high technology sci-fi and complicated, so I won't go into it, but one of the major underlying themes is that of robots gaining sentience. It captures the question of a robot or Artificial Intelligence gaining self-awareness that borders on a soul (hence the term "ghost in the shell").
In other words, Ghost in the Shell is exploring the same theme as Frankenstein a hundred years earlier: what makes us human?
Why the comparison?
Well, both tales ask the same question, but go about it with very different themes. Frankenstein is all horror and monsters, good and evil, and science and religion; a theme that reflects the world of the 1800's that was on the cusp of modern scientific progress, yet still permeated with religious and superstitious beliefs. Ghost in the Shell is all science and science fiction, shifting identities and forms, and spirit and technology; a theme that reflects the fact that the modern world is evolving into one where the majority of ones life is in fact interacting with, using or relying on some form of Internet/technology.
The Ghost in the Shell is as much a product of the times as Frankenstein was back in 1818. The only difference is that technology is now the major variable changing day-to-day life for most people (and, with all respect to kings and priests, no longer kings and priests in that role).
This is due to the fact that technology uses technology to build technology. As there is more technology out there, we built new technology faster and faster.
Does this sound like an exponential curve to you? In fact, it is and the point where the slope of that curve becomes vertical is called the 'technological singularity'.
Personally, I think we are ages and ages away from any potential 'singularity moment', but the theory does give a good base to understand why the pace of technological innovation and invention will in fact increase over time.
The company founded by the man that invented the hand-held camera, Kodak, has just filed for bankruptcy. Kodak is not just a 130-year old company, but one that was at one stage the technological leader in an entirely new industry.
Unfortunately, times change and technology changes even faster. Kodak fell behind and now there will no longer be any more Kodak moments.
This serves as a warning to those (read: IBM, Apple, Google, Facebook, etc etc) currently technology leaders in the global economy.
The average life span of a company on the S&P has been steadily dropping (read here) from 75 years (in 1937) to 15 years. By 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet. While I do not have the data (and I doubt anyone else does either), I am pretty sure that the rate of technological progress has very strong negative correlation with the average life span of companies.
So, what is my point?
Besides what I hope are some interesting links for you to follow (e.g. find and watch the beautiful Ghost in the Shell I and II!), the important investment lesson here is that analysising a company's competitive advantages has never been more important. And it will get increasingly so. Technological growth and innovation in a company are no longer nice-to-have's, but, in fact, increasingly core to the company's survival.