by Mark Bern, CFA
We have all heard the many buzz words about the future
technologies coming: VR (virtual reality), AR (augmented reality), AI
(artificial intelligence) IoT (Internet of things), 3D sensing, drones, autonomous
diving cars, and 5G (5th generation broadband – a form of networked Wi-Fi,
or a form of wireless communication). I
will try to explain some of these terms and why we, as investors, need to pay
attention to the respective evolution of each in this and the next few weekly
letters.
VR vs AR
It is easy to confuse the two terms as both are ways that
tech can change the way you look at the world around you.
VR immerses you in an imaginary or simulated environment,
like a computer game. You can see
everything around you in the game and react with other players. It may seem real or it may be animated, it
all depends on the developers of the application. It may be created by millions of photos of
actual places to make you feel like you are there. Imagine visiting Paris and walking down the
Boulevard Hausmann with an incredible view of the city and the Eiffel
Tower. With VR it will seem like you are
actually there.
AR enhances the environment you are already in with added
digital displays with information about that which (or who) you are
looking. With a pair of AR glasses you
would never forget a name! Golfers could
look at the flag from anywhere on the fairway and know exactly how far away it
is. You could look at any building and
the address would pop up on the screen.
Want more information about the building? Just ask.
AR is the practical one of the two while VR is mainly for entertainment.
However, each can have industrial applications. Simulating tests of a product in design phase
in a VR environment can cut costs dramatically.
Having an AR app that can provide technical design and stress data for a
part being inspected while measuring the pressure could help identify a
potential break down before it happens and save a ton of money and
downtime. The list of potential applications
is endless.
What is AI and why
should I care?
AI is different depending upon its level of advancement and sophistication. Currently, one of the most common use of AI
is a learning algorithm that records responses over time and gains a better understanding
of what someone may want. Netflix has
become a huge user in this sense.
Retailers like Amazon use such AI in an attempt to sell you more than
you initially intended to buy, as do many online retailers.
AI is being used to develop autonomous driving cars using
sensors and recording data about its surroundings while also recording the
reactions of a human driver responding to the environment. It can learn what to do in almost any
situation and what not to do from repeated experiences with multiple human
drivers. It continues to learn from
experience, similar to a human, but its capacity for learning is nearly
infinite and its retention and recall of information is instantaneous. In theory, AI can teach the car to be a
better driver than a human.
But AI is so much more.
The potential of applications is, once again, nearly endless. AI-enhanced robots and machines can do much
of the work of humans, even to the extent of building other “intelligent”
machines. At this point some of you are
probably conjuring visions from the Terminator series. Without proper controls and forethought we
could be heading in that direction but we are probably decades away from
needing to build bomb shelters.
AI will create jobs at the same time that it eliminates
jobs. It has the potential to cause
disruption more than half the major companies of the world. I think that elicits a strong prerequisite
for paying attention.
IoT and Billions of
Connections
At some point, most mundane appliances and machines will be
connected to the Internet. Much of the
data will be gathered by tiny sensors measuring everything and selecting that
which is important enough to be uploaded for additional processing. Everything will be voice activated at some
point. If you want to know if the dishes
in the dishwasher are clean or dirty, just ask the dishwasher and it will tell
you. If you want your toast to be
lighter than the last time tell the toaster and it will adjust accordingly. Dim you lights, turn on the TV, order food
delivery from your favorite restaurant.
We will one day be able to do any of these things (and much more) with
voice commands. We are getting closer
all the time with Alexa and Siri and the devices that use them.
Autonomous Vehicles
The day when we can just get into a car and tell it where we
want to go, then sit back and enjoy the ride is coming sooner than most of us
imagine. Self-driving cars could be on
America’s roads within five years. The
areas in which these vehicles will be able to operate may be limited at first
as governments play catch up, especially at the local levels but also at the
federal level. Cars can already parallel
park better than most humans. Sensors can
prevent most accidents. We are not there
yet but the advancements are staggering and the race to be first to market is
rapid.
There are some scary concerns, too. If all the vehicles on the highway must
“talk” to each other and constantly transfer information there could be
openings for sophisticated hackers to take control of your car or the truck
behind you. Hopefully, there will be
safeguards built into the systems to avoid such craziness. But, of course, the government will want a
way to gain control of cars so they can pull over speeders or violent criminals
without a chase and there would go the safeguard as hackers would find that
secret backdoor eventually.
But what makes all of the connections and data transfers
possible? IoT is dependent upon a much
faster Internet with far greater bandwidth capacity than exists today. That brings us to the one technology upon
which almost all other will depend: 5G.
What is 5G and how
can we profit?
5G is a wireless broadband network that will provide
Internet speed 100 times faster than the current fastest wired
connections. Think fiber optic
connections on steroids, but without the wires.
This is the network that makes possible the IoT and self-driving
vehicles, AR and VR data transmissions to bring all that data from its sensory
data sources to the cloud and back in a millisecond. Without the data transfer capacity and speed
of 5G, nothing else will work as well as intended. It is the future backbone and foundation of
almost all data transmission and the technology that it enables. Without it none of the rest can become reality.
Who owns the most relevant patents on 5G technology? Interdigital (IDCC). There are other, of course, but IDCC is in
the catbird seat as far as I can tell.
It will ring up the royalty payments at nearly every stage of the coming
5G deployment.
The full, nationwide deployment of 5G could take a full
decade to complete. So, that is why much
of the technology we look forward to will not be available universally for
several years. The build out of the
network has already begun but it is in its nascent stage at the moment. As deployment ramps up IDCC revenue should
explode higher and the costs associated with the revenue are minimal, like
software. Others will license the technology,
pay royalties to IDCC and then build components for the network.
The network will be made up of towers, similar to the
cellular network(s) in existence today.
The big difference is that the distance between towers will need to be
much shorter to maintain the speed and bandwidths. The towers can be smaller and placed atop
buildings but will need to maintain line of site meaning the towers (antennae)
will need to be in site of each other.
The greater the density of antennae/towers the better the speed and
reliability of connections. It has been
estimated that there will need to be five towers to support 5G to every single
tower today.
The other thing to remember is that when 5G is fully
deployed we will no longer need cable or wires for phone or Internet
connections. We will no longer need
cable. This infrastructure changes
everything! Whole industries will rise
and fall in conjunction with the 5G roll out.
So, stay tuned because this could get very interesting.
Respectfully,
Mark Bern, CFA
Bern Factor LLC
540-241-1963 (new number)
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