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By Doug Rao

from JanusHenderson.com

03 January 2018

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Technology has long played a role in determining a company’s competitive advantage. In recent years, however, this trend has become amplified. Advanced technologies such as improving chip processing speeds, cloud computing and mobile connectivity are allowing firms to reach consumers through new channels, aggregate data, build vast networks and innovate – widening the moat between themselves and competitors that are slow to adapt.

As such, we argue companies today can be organized along what we call the digital divide, which, at a high level, separates the firms with the potential to thrive in the digital era from those that are likely to struggle. Drilling down, we think there are five major categories of the divide:

Five Categories of the Digital Divide | Janus Henderson Blog

The Right Side: These firms are helping drive today’s digital disruption. These are often large tech platforms that collect vast amounts of consumer data and use that data to improve user experiences, roll out new digital tools and solidify networks. It’s a virtuous circle that becomes increasingly difficult to compete against.

The Wrong Side: Companies in this category are structurally flawed for the digital era. Brick-and-mortar retailers are one example. Traditional brick-and-mortar retailers are high fixed-cost businesses and many have found it challenging to shift their distribution channels to an e-commerce model.

The Middle: In this category, you’ll find firms endeavoring to transition to the right side. Microsoft is a good example of a company that was once in the middle. Faced with competition from web-based applications, the company decided to move its popular Office software to a subscription model, providing users with new conveniences (such as the option to use the software across devices), while creating recurring revenue for the company. Microsoft also launched what is now one of the leading cloud-computing businesses in the industry.

The Support: These companies are helping firms succeed in the digital economy. Salesforce, for example, offers a cloud-based customer relationship management platform that companies use to improve client experiences. As more firms have come to rely on such tools, Salesforce has been able to consistently grow revenues.

The Outside: This group is the exception. Companies on the outside tend to sell products or services that don’t translate well online. Paint is a great example of a product that is not well suited to online distribution. Most customers, both retail and professional, prefer to buy paint in a physical location where they can see the paint colors and where a professional can mix the paint for them.

Looking ahead to 2018, we think the digital divide will continue to grow in importance in differentiating companies that can deliver sustainable earnings growth. We are also seeing exciting developments in other advanced technologies, such as artificial intelligence (AI). AI allows machines to simulate human intelligence processes, such as learning and reasoning. This will have vast implications for the economy, from the semiconductor firms that supply the immense computing power required by AI, to the multitude of new products and services that could be made possible by AI (self-driving cars, for one).

It’s a revolution that carries regulatory risks and uncertainties about which technology platforms will win out. But it’s also the lens through which we now think about every investment.

 

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This article by Doug Rao was originally published at JanusHenderson.com

2018-02-23T23:15:15+00:00

By Investing.com

03 January 2018

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Bitcoin prices climbed on Wednesday after The Wall Street Journal reported that Founders Fund, run by Peter Thiel, a PayPal co-founder and early investor in Facebook, has bought millions of dollars of the volatile cryptocurrency.

Bitcoin was trading at $14,766.00 by 06:32 AM ET (11:32 AM GMT) on the Bitfinex exchange, after rising as high as $15,428.00 earlier.

The venture capital firm bought around $15 million to $20 million in bitcoin and has told investors that those holdings are now worth hundreds of millions of dollars following bitcoin’s price surge in 2017, the Journal reported.

In October, Thiel said people were “underestimating” bitcoin and compared the digital currency to gold.

“If bitcoin ends up being the cyber-equivalent of gold it has a great potential left,” he said.

The digital currency had risen around twentyfold since the start of 2017, climbing from less than $1,000 to as high as $19,891 on 17 December on Bitfinex and to more than $20,000 on other exchanges.

However, from its all-time high reached in mid-December, the price dropped by almost half over the rest of the month.

While bitcoin investors believe the decline was a natural correction after its breath-taking rally there have been warnings of an asset bubble from market regulators and central banks.

In late December, Morgan Sanley analysts warned that the real value of bitcoin could “be zero.”

Researchers noted that if bitcoin is not accepted as a rival to the U.S. dollar and other fiat currencies, then it is literally worth nothing.

On Tuesday bitcoin’s dominance of the cryptocurrency market fell to its lowest ever level amid growing interest in alternative digital currencies.

Bitcoin’s market capitalization was $231.7 billion, around 36% of the total value of all cryptocurrencies, its lowest ever market share. At the start of 2017, its market share stood at over 80%.

Meanwhile, Ripple, the second most valuable cryptocurrency by market cap after bitcoin, was trading at $2.373 on the Poloniex exchange after setting a fresh record high of $2.49 earlier.

Ripple’s market cap continued to climb on Wednesday, peaking at over $105 billion. Over the weekend, Ripple surpassed Ethereum to become the second largest digital currency after bitcoin.

Ripple rose in value by more than 32,000% over the course of 2017. It began the year trading at around $0.006 and ended at $1.98.

Ripple’s gains in 2017 outstripped the gains of Ethereum and bitcoin, which rose by roughly 9,000% and 1,400%, respectively.

 

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This article was originally published at Investing.com.

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