Moore’s Law and the Limitless Potential of Technology

Moore’s Law and the Limitless Potential of Technology Imagine it’s 1965: the economy is chugging along, median family income is surging, and the stock market is on a path to deliver average annual gains of +14.9% (during the 1960s bull run). The US economy is growing nicely – without the help of a single computer – and few people can fathom how things could really go any better (politics and Vietnam notwithstanding). But then there was a fellow named Gordon Moore, who at the time was the Director of Research at a company called Fairchild Semiconductor. He wrote a paper in 1965, called “Cramming more components onto integrated circuits,” and he had a vision of a future where “integrated circuits [would] lead to such wonders as home computers … automatic controls for automobiles, and personal portable communications equipment.” All sound familiar? Indeed, it is simply amazing to realize just how accurate Moore’s ideas were. But the thing is, even Moore didn’t have a clear idea for what to really expect. Even with knowledge and imagination as unique as Moore’s, he was only able to fathom an idea that we would one day see “such wonders” as home computers and “personal portable communications equipment” (smartphones!!). We don’t think that anyone in the 1960’s could have imagined how the modern economy would look today, with just about everyone utilizing smartphones and computers in day-to-day business dealings. For investors, that’s the key idea to keep in mind today: we probably have very little idea what type of technology, gadgets, and software will drive the economy ten, twenty, or thirty years from now. And that’s not a scary thing. That’s a beautiful, opportunity-filled thing. Where Will the Technology Go from Here? Moore’s ideas ultimately become Moore’s Law, which said that the number of transistors that could be placed on a silicon chip should double every year while the costs are halved. The benchmark became about every 18 months, but nevertheless Moore’s predicted advances led to personal computers, laptops, mobile devices with enormous computing power, tablets, and so on. Because of advances in nanotechnology, some transistors are now smaller than a virus, and today’s chips have over a billion transistors on them. Unfathomable! Then there is also Koomey's Law to consider, which said that the amount of battery power required to perform a given set of computer computations would cut in half every 18 months or so. That’s why computers have gotten smaller and lighter, and almost certainly will continue to do so. Eventually, Moore’s Law will reach physical limits – it will be impossible to create smaller circuits. But that does not mean technological advances will just end, in our view. If history teaches us anything, it’s that computers may take on a completely different form that we simply cannot understand or fathom today. In our view, it may be less about the gadgets and hardware and more about the software and applications that workers can use to advance business. In that sense, for investors it could be just as important to look beyond the companies developing new technology and also focus on how companies are deploying technology. In other words, the winners could very well be the companies who use new technology to operate more efficiently, reach more customers, and provide better and faster solutions. These are not necessarily companies you’ll find exclusively in the technology sector. In fact, many of them are as far from technology companies as you could imagine – retailers using software to better manage inventory, energy companies using technology to accurately map and extract shale gas, medical devices companies developing new tools for delivering healthcare, financial services companies like Zacks Advantage using technology to build and manage investment portfolios. The list goes on and on, and like Moore’s Law, will continue to produce results and processes that are near impossible for most people to imagine. Bottom Line for Investors After writing the article we referenced earlier, Gordon Moore would eventually go on to co-found a company you may have heard of: Intel. Intel’s work – and the incredible evolution of computing power – are arguably responsible for the formation of thousands and thousands of new companies that employ millions of people today. In 1965, we do not think anyone could have imagined this possibility. In our view, this mindset of near ‘limitless’ possibilities in technology should encourage investors to see the long-term future of the economy as one that will produce thousands more companies and millions of new jobs. We cannot know what those companies and jobs will look like, and what speedbumps we are likely to encounter along the way, but a belief that things will get better, faster, cleaner, more efficient, and ultimately, more profitable, means a belief that the US economy – and by extension, stocks – have a bright long-term future. For long-term investors, we believe investing in equities means participating in this value creation as it occurs over time. For investors, though, a big challenge still remains –That’s where Zacks Investment Management has innovated with new financial technologies and now offers an actively managed robo advisor that: - Automate the advising process. - Investing exclusively with ETFs - Uses technology to recommend the appropriate mix of equities and bond ETFs to help achieve your investing goal and specific risk tolerance. - Lowering fees and expenses For further information, we recommend you read our report: The Savvy Investor’s Guide [Get your copy of The Savvy Investor’s Guide]( © Zacks Investment Management | [Unsubscribe]( DISCLOSURE Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. 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