Blockchains, Bitcoins, and What Comes Next

When I first heard of Bitcoin and the blockchain, I was chary. I'm always skeptical of anything that calls itself "The Truth", and the ardent Bitcoin supporters weren't helping. 

Many technologies actually start like this. They seem absolutely absurd to the those who live in a world without them. To be fair, most technologies are crazy and unrealistic, but a select few advance far enough to change the world. 

So what changed, you might ask your optimistically pessimistic writer. 

The way I approach the question of disruption is not how most people do. I'm not the biggest fan of The Innovator's Dilemma, since it's too formulaic. Instead, observe the present and try to identify pain points. Let's take a recent pain point; MetroCards. Why do millions of New Yorkers have to carry around a small, easy to lose plastic card when NFC and other contactless solutions exist today? The answer is simple: it costs the city a lot of money to build the infrastructure necessary to support contactless payments in all boroughs. The project would cost billions of dollars, and would undoubtedly be inefficient as most government sponsored projects tend to be. The first company or startup to figure out an affordable solution to this clear problem will be the technology to win. The pain point is in archaic MetroCard, and the solution is a technology that affordably substitutes it. 

Banks make billion dollar bets on spreadsheets. Every single multi-billion dollar deal you see on the news - it is modeled in Excel at some stage (sometimes all stages). Corporate tax accountants, who calculate data that needs to be precise, also use Excel for most of their work. The same applies to auditors, consultants, and investment managers. Excel is the fabric on which the worlds financial data is weaved, but the material isn't very good. 

Every new release, Excel becomes more powerful and is able to handle more data. But while Excel improves rather linearly, the amount of data that needs to be processed increases exponentially. Writing about our ability to predict randomness, Nassim Taleb writes in The Black Swan:

...the gains in our ability to model (and predict) the world may be dwarfed by the increases in its complexity

The reason I included the quote above is because it's entirely how I view the state of spreadsheets. While I don't see them going anywhere for most basic to intermediate needs, their time will eventually pass for more complex financial data sets. 

Enter Chains of Blocks

At the same time that the complexity of the worlds financial data is beginning to become burdensome, a new technology shows up called Bitcoin. With it, Bitcoin brings the blockchain. 

Behind the scenes, the blockchain is quite complex (although not as complex as you think). But at the end of the day, what it provides is fairly simple (in financial applications, which I am focusing on). There are two major functions that the blockchain provides. First, it disaggregates information. Second, it allows you to trust otherwise trusted parties. These two functions bring a slew of other benefits, so they're worth discussing in more detail. 

Disaggregated Data

Currently, financial data is located in many places. For example, if you run a hedge fund, you have a copy of your data. Another copy lives with your custodian, which is usually another bank that handles your administrative tasks. Finally, there's the accounting department, which also keeps a copy of your transactions. At any point in time, there could be many reconciling items that don't match between the data you have, the custodian has, and what the accounting department has. That's not because they're bad at their jobs, but because the data is often too complex to handle. This is a gross simplification, yes, but the theory is not far from reality. 

A large part of the accounting profession is actually keeping track of this data, which is an incredibly messy process. And accountants are not so cheap. 

What the chain would allow is for that copy of financial data to exist at the hands of all the involved parties. As transactions happen, they would be recorded in the chain - and everybody involved would have access to that same chain. No reconciling items (in theory, in practice there are always some), no inefficient accounting departments, no lost financial data. 

A Brief History of Money

For the past few weeks, I’ve been reading a fascinating book, Sapiens. If you’re even a slight history geek, you should give it a read. The reason I bring it up here is because there is a chapter on the history of money, currency, and value (all synonymous terms), which put many things in perspective for me. A carefully selected excerpt:

Yet money existed long before the invention of coinage, and cultures have prospered using other things as currency, such as shells, cattle, skins, salt, grain, beads, cloth and promissory notes. Cowry shells were used as money for about 4,000 years all over Africa, South Asia, East Asia and Oceania

I’m sure you didn’t need me to tell you, my very dear erudite reader, that dollar bills did not exist when the first homo-sapiens traversed the Asia-Pacific landmass. Instead, these early humans used shells and other simplistic items as their currency. But there is a larger point I am trying to make here, and it’s the fact that our modern currency is not a constant throughout time. We assume the U.S. Dollar has been around and will be around forever. But in the grand scheme of things, it has been around a very short period of time (for the curious, the Dollar has been around circa 1786). 

So now we know two things. First, you know I’m a history buff. Second, we know what that the form of money changes through the time periods - we don’t always use the same currency. We can also make a third assumption, and that is at some point in the future, we will go from dollar bills to some other form of a store of value. What the form will be I have not the slightest clue. All I know is that it the time will come, and the best way to prepare is to explore whatever new monetary technologies sprout up. 

A Quick Aside and a Probability

If you’ve spent some time in the finance industry like me, you’ll be well acquainted with this next part. If not, you will also be well acquainted, albeit by the end of it. There are two types of analysts on Wall Street; buy-side and sell-side. The sell-side guys usually work at a brokerage firm, and gives recommendations to “buy”, “sell”, or “hold” a security (stock). What happens when they get it wrong, such as when the analysts’ report says to sell Apple stock when in fact it keeps going up for the next few years? Usually, nothing happens. There are so many sell-side opinions that get things wrong that any individual analysts opinion often gets lost in the noise. 

In stark contrast, buy-side analysts usually work at companies that buy securities rather than sell them (that might be obvious, but not if you’ve never worked in the finance industry). These companies are usually mutual funds, pension funds, hedge funds, and other companies with pools of money to invest on behalf of other people. A buy-side analyst publishes internal reports, which are not available to anyone outside the company. If they get it wrong, the limelight is on them. Thus, what buy-side analysts often do is assign probabilities to their recommendations - which tells the investment manager how strong the analysts convictions are and whether the manager should act on those convictions.

I wanted to give this brief aside because probabilities of outcomes is exactly what I’m about to give. I think providing probabilities is one of the most helpful things any prognosticator of a future event can give. When I open my weather app, I see the percentage for rain, which in turn influences my actions. If there percentage is low, I am not bringing my umbrella. If it is high, both an umbrella and a raincoat will be donned. 

With that all said, back to bitcoin, blockchains, and the future of money. What are my probabilities for each of these technologies?

Bitcoin (lower case “b”): 20%. Bitcoin the currency has too much history, and too many fanatics. That baggage weighs it down, hence the chances of it taking off are 20%.

Blockchain/Distributed Ledgers: 90%. The protocol which powers everything, the blockchain, is a form of a distributed ledger. Investments by most major players have already been made to explore this technology, and some solutions are already being offered. I’m nearly certain that most ledgers will be distributed (but not fully decentralized) within the next 5-10 years.

Money: 30%. What I mean by money is physical money. Cash money. Unfortunately, as much as I hate carrying cash and coins I doubt they will be going away in the next 10 years. The major reason for this is that cash is heavily entangled with the government, and these things tend to move especially slow. Moreover, cash solves needs that digital currencies may have a hard time solving (the ability to hide cash, for example). 

Getting Dropbox's Act Together

I'm not sure what Dropbox has been doing since I last wrote about them almost a year ago. There have been many recent headlines of Dropbox's lowering valuation - it has even been branded a dying unicorn, but that might be a bit extreme (as tech headlines tend to be). To me, the path Dropbox should be taking is so clear that I can begin selling vision pills for flustered founders. At the heart of the matter, Dropbox is a company that wants to provide services for consumers, but lives in a market that only thrives in enterprise. 

Selling cloud storage may have been a good business model five years ago (even then it was questionable), but today, it is downright impossible. Just look at Box's financials (hint: unprofitable). Apple, Google, Microsoft, and Amazon have squeezed out any margins that could have been made out of cloud storage by using their massive economies of scale. Cloud storage is effectively a commodity, and Dropbox needs to forget about selling it to consumers. 

That's not to say things are going to be dire for Dropbox. If you want to compete in this business, you've got to offer more than just some terabytes in the cloud. Dropbox's best bet is to go after enterprise. And what better way to go after enterprise than to go directly for Microsoft Office?

Mailbox > Outlook

Nobody enjoys using the Outlook desktop apps (the mobile app, which was originally Accompli and repurposed to be Outlook, is well regarded). Outlook is a codger, anachronistic piece of software that makes email feel like it's 1999 again. It is cluttered with features that very few people use, existing only because some large enterprise client convinced Microsoft to add it. When Dropbox purchased the email client Mailbox, I was sure they would go after the email space. To my surprise, they didn't. 

People want out of Outlook, so give them an option. What Dropbox needs to do is make a semi-powerful enterprise friendly email client. Start with what you have from Mailbox, and build it out. There's already a productivity angle to Mailbox - all that needs to be done now is to make a Web/Windows client, and add some additional productivity features. This would make it much easier to pierce enterprise IT departments. I'm a Mac guy myself, but I'm not oblivious to the fact that enterprise is still very much synonymous with Windows.

Dropbox > OneDrive

This one is easy. Dropbox is already the best (and most expensive) cloud storage provider. Search is fast, the design is great, and the integration with apps is unparalleled. What's not great is the lack of integration with other Dropbox apps. 

Attaching files to an Outlook email is an extremely clunky experience in most corporate environments. What if you could simply open your Mailbox app (on any platform), click attach, and quickly search your Dropbox account for the file. You can sort-of do this now with the Mailbox iOS/Android apps, but for it to truly be powerful, desktop support needs to be added (Mailbox for Mac is in beta). 

Dropbox Office > Microsoft Office

The Grand Canyon is said to have been formed by the Colorado river 5-6 million years ago. Similarly, Microsoft Office has been formed by Microsoft's slow, iterative, and consistent updates. At this point, I wouldn't be surprised if the history of Office will be as storied as the Grand Canyon. With the exception of Internet Explorer, I doubt there's a more popular and long-lasting piece of software than Microsoft Word and Excel. These two productivity apps dominate in both consumer and enterprise markets, and for good reason. They're extremely powerful, have great support for older versions, and have file extensions everyone can open. This creates a positive feedback loop where people use Microsoft Office because other people use Microsoft Office, thereby guaranteeing that when you send someone a file they will be able to open it.

But as great as Word and Excel are, they're not great productivity tools for working in 2015. With competition from Google Docs, Apple iWork, Quip, and probably another few dozen productivity apps, the age of Microsoft Office is beginning to show. Collaborating on a document in Word with multiple people is not ideal. Inserting and marking up an image in Excel is still too much work. File syncing and concurrency issues can be hit or miss. The mobile apps are powerful but feel heavy. In short, Microsoft Office has many pain points that users would love to get fixed.

Dropbox is getting into this métier already, but not quickly enough. If you open a PDF/Word document in Dropbox, it will allow you to view the document without downloading a local copy and opening it in Adobe Reader/Word. Dropbox also has a very awkwardly succour partnership with Microsoft, whereby you can use Microsoft Office and integrate it with Dropbox. But these are half-steps. What Dropbox really needs to do is create competitor products to Word and Excel. The goal here is not to create a me-too product, but to offer a comprehensive enterprise software package that a CIO would want to purchase for his company. It needs to compete with Microsoft on every front, and win on most (Germany is said to have lost WWII by fighting on too many fronts at once, spreading itself too thin. Dropbox should focus on the above three fronts, and abandon the others such as its photo service Carousel). 

The Business Model

Having a great product without a great business model is very much like having a nice TV with no channels to watch - it doesn't stand on its own. The problem Dropbox has had since day 1 is converting free users to paid users. And they still suffer from the same problem, mainly because the value they offer (storage) is too low. That's why it's so imperative from Dropbox to lock in enterprise users. The first major benefit of enterprise users is that they pony up the money. Second, if you get them stuck in your moat, they stay in your moat. 

This is precisely why I'm suggesting Dropbox go right after Microsoft - it's a proven business model that pays great dividends. It's true that enterprise is not in Dropbox's culture, but that's fine. You can design great enterprise applications with a consumer model in mind (great design, UX). Many people already use Dropbox at work, but it is their personal account. Now it's time for them to charge the company for that service. 

The Amazing Amazon

Some companies are simple to analyze. Their business models are straightforward, customers are easy to identify, and products clearly distinguishable. To the deep chagrin of analysts, Amazon is not this type of company. 

Amazon went from having Sales of $511k in 1995 to $2.76b in 2000. Fast forward to 2014, Amazon's Sales were roughly $90b. I have no doubt Sales will continue to grow in the future, but the question is just how fast? In percentage terms, Sales growth seems to have slowed since 2011, and has been declining since. This is a normal trend as a company matures, so it's nothing to get preoccupied about, but is nonetheless worth noting. Wall Street adores Amazon because of its unrelenting growth, and any significant slowdown may hurt Amazon's stock price. 

Not much to add here except that Gross Profit continues to grow as a result of Sales growth. 

This next chart is where things get a little more interesting. The Gross Margin percentage restates Gross Profit on a percentage of sales basis to give us a little clue how profitable Amazon is as a business. After a period of plateau from 2003 - 2011 where Gross Margin hovered around 22-24%, it started to lift off in 2012 reaching 25%. Since 2012, it continued to grow to 27% and 29% in 2013 and 2014, respectively. 

I wanted do some more digging on why Gross Margin increased, so I took a deeper look into Amazon's financial statements. In Accounting-speak, here is Amazon's statement on the increase in margins (emphasis mine):

Gross margin increased in 2014, compared to the comparable prior year periods, primarily due to service sales increasing as a percentage of total sales. Service sales represent third-party seller fees earned (including commissions) and related shipping fees, digital content subscriptions, and non-retail activities such as AWS, advertising services, and our co-branded credit card agreements.

There is a lot to take in there, so let's break it down one by one. The first statement I bolded was that margins grew primarily due to service sales increasing. Amazon makes money from two primary sources: 1) product sales and 2) service sales. Products are the physical goods Amazon delivers (clothes, diapers, granola bars) as well as their digital media (video). Services include Amazon Prime (Amazon takes the $99/year subscription and allocates it between products and services such as video/music), Amazon Web Services (AWS), seller fees (Amazon charges you for selling on Amazon just like eBay), advertising (Amazon.com has ads), co-branded credit cards (you can purchase credit cards on Amazon, for which they take a cut). Since Amazon stated margins grew primarily due to services sales, we know where growth may come from in the future. To narrow it down even further, I suspect growth will come from Amazon Web Services (AWS) at an increasing rate (Apple, for example, uses AWS to host many of its iCloud services).

Percentage of Sales

Operating expenses are growing in real-terms, but decreasing on a percentage basis. Around 70% of these expenses are Cost of Sales, which is as expected. 12% are Fulfillment, which is basically delivery of goods. 10% have to do with Technology and Content, which encompasses the licensing deals Amazon has to pay for the TV, movies, and music it provides with Amazon Prime. 5% of the expenses are Marketing (have you seen their Kindle commercials? They are terrible). Finally, the remaining 3% include General and Administrative and Other expenses, which is nothing in the grand scheme of things. 

There are two types of people in this world: those that think Amazon will never be profitable, and those who think Amazon can turn profitable as soon as Jeff Bezos flips a switch. I think we need a third type of person in this binary world who will say Amazon can turn more profitable, but not necessarily be extremely profitable. Amazon is not exactly a high margin company (perhaps AWS will be as it becomes an increasing part of Amazon's business), so quickly scaling it profitability will be tough. I did a quick calculation that may interest you: since 1995, Amazon made $2,441,872,000 in profits. In other words, after 20 years of being in business, Amazon made roughly $2.5 billion in clean, unadulterated income. Of course, this is because Amazon reinvests most of the money it makes back in the business, but the statistic is nonetheless fascinating. 

Coda

If you saw me walking on the street, ran up to me, and said "Larry, what do you think about Amazon", I would tell you I don't know. Amazon is difficult to form an opinion on because it's like trying to predict the behavior of a human being, which in this case is Jeff Bezos. On the whole, people act entirely rationally, and a smart person makes mostly good business decisions (expanding from selling books to products to services and now AWS is what a smart person would do). But even the best of us make strategic blunders sometimes, which can either set us back a little or totally ruin the company (the Amazon Fire devices are just setbacks - why do they exist again?) The best person to ask about the future of Amazon would probably be Bezoz's psychiatrist rather than an analyst. 

Accounting and Finance for the Future

In the last fifty years, the worlds of accounting and finance changed dramatically, mostly due to two factors: regulation and technology. I’ll leave the regulation part of out of this discussion for a later time, but the technology aspect is fair game for us.

In the old pre-computer days, the accounting and finance professions had to do everything by hand. To calculate the revenue of a company, you couldn’t just use a SUM function, you had to manually sum up all of the individual numbers with a calculator and a pen in hand. As you could imagine, mistakes were made often, and very difficult to find. 

Enter computers and information systems. Digital spreadsheets such as VisiCalcExcel, and QuickBooks came into existence, making the lives of number-crunchers phenomenally easier. One benefit of spreadsheet software was that you didn’t have to manually write everything out. Spreadsheets were efficient, in every academic sense of the word. Another was the timeless nature of digital records - they don’t expire with time (caveat: formats go out of style, and hard-drives fail, but compared to paper records spreadsheet software was a huge win for the profession). To be sure, ample negatives existed as well. It is potentially easier to get away with fraud since digital records can be easily deleted (especially if the fraudster is a member of management). 

But this post isn’t a history lesson. In fact, it is quite the opposite. I included the discussion above just to give you a little glimpse into how the accounting and finance professions changed in the past few decades. I think it is a fair assumption than to say that they will continue evolving in the next few decades as well. 

Accounting and Finance in the Future

You do not need to be a erudite to see that both accounting and finance will be moving into the cloud. In fact, much of it already has. Most large companies keep backups (and original copies) of their financial data in the cloud, purchasing proprietary or off the shelf solutions (in the consumer space we call it a product, but in enterprise it is a solution) from companies such as Microsoft, Salesforce, Box, and countless others. The future of all data is in the cloud. That pontification was easy.

But what about live, continuously updating financial information? Traditionally, management, investors, and other company stakeholders would request monthly, quarterly, and annual financial disclosures. These disclosures are heavily regulated by the PCAOB, SEC, AICPA, and countless other governmental and administrative agencies. The data often takes a lot of time to compile, since it’s housed in various locations, segregated to many employees, and needs to be audited before release. 

But what if this would be a nearly instantaneous and live process in the future? As often is the case with this blog, let me explain through example. You’re a manager and you want to know how many sales your business line made this week, how much you already received in cash, and how much is still due from customers who have not paid up yet. In most companies, this fairly simplistic analysis would begin with the manager (you) emailing an associate for the data, followed by the work being performed by the associate. This work could take anywhere from 10 minutes to a few days to complete, depending on the company. If it is a more tech savvy company, you might have access to “Business Intelligence” graphs and charts which allow for some quick, glance-able and manipulable data. But even at the tech savvy companies, instantaneous data isn’t common. 

Now imagine how accounting and financial information should be. As soon as a sale goes through, you can see the “Revenues” increase instantly, as well as a corresponding increase in “Cost of Goods Sold”. There is also a bar chart to show you sales trends over the past few days and months, that also gets continuously updated every time a sale is made. Continuing with our previous example, you can see that with every sale you make, your “Accounts Receivable” increases, as the customer owes you money on what they purchased and have not paid for yet. Every transaction that can be accounted for in the information system is accounting for in the system (this exists now). But every transaction is also categorized instantly, every account balance updated, every chart redrawn…everything is constantly up to date across the entire accounting system, which sits in the cloud. The data is simple to understand, quickly comprehensible, and immediately available for private and public consumption (imagine how happy investors would be). We got a man to the moon in 1969. We should be able to make one more giant leap, this time for accounting and finance, by 2020.

The Future is the Present, and the Present is the Past

Over the long-run, technology moves at a lightning pace. But at times, it can feel downright dilatory. If you asked me in 1998 if I would still be using paper textbooks in school, I would say there is no way. We’re about midway through 2015, and textbooks are still the norm (in university, at least). If you told me in 2005 that scrolling through an 800-page PDF would be slow on a relatively new laptop (late 2013 rMBP), I would have politely called you a cynic who needs to look up Moore’s Law. And yet, these are the realities we have to deal with. Sometimes moonshot products are revolutionary and change the world. Most of the time though, they are early arrivals and short guests. There are, however, some technologies that arrive right on time and make it to dinner. Here is a short list of technologies I believe will succeed in the next 20 years. 

1: Usable Voice-Input

Dictation technology is not new. As far as tech goes, it’s ancient. For voice-input to be truly useful, it needs to do 90% of the job a secretary would otherwise do. Take nearly flawless notes. Schedule and re-schedule meetings with contextual awareness (“John called in sick today, we will need to reschedule to 5pm tomorrow”). We’re still far away from an AI with human empathy, but not so far away from great voice-to-text+a little more input. 

2: (Semi)-Self Driving Cars

They already make cars that will alert you from switching into lanes with another car nearby, or breaking for you. It’s still a luxury feature, and it still doesn’t do enough. I can see a future where cars will park themselves, but not drive themselves. Hence, (semi)-self driving cars. What we really want is cars that are totally self-driving, but that is farther than 20 years away. Why, you might ask? Well, it isn’t a technology issue, it’s a trust and safety issue. 

For self-driving cars to become a thing, they not only have to be safer than human-driven cars (being as safe isn’t enough), but they have to be viewed as safer. There’s a subtle difference: how safe a car actually is versus how safe we perceive it to be. Air travel is a safer method of travel than automobile, and yet the perception it is more dangerous. This perception of danger is based both on reality and fiction. In reality you’re thousands of miles in the air and not in control (the pilot is, hopefully). In a car, you’re on the ground and totally in control (in reality, you’re texting or listening to music). Self-driving cars need to tackle both reality and fiction to become the mainstream, which is why they will be (semi)-self driving for the next few decades. 

3: Stream Everything

Without being too much of a curmudgeon, I’ll say that I grew up in the golden era of Blockbuster and local mom and pop video shops. Sometimes you had to wait a week or two until the movie you wanted to see was back in the store and available for rent. It was glorious and it was miserable, all at once. As a result, there were a lot of movies I wanted to watch but ended up skipping just because of the friction of getting it on VHS.

A bit later, we were introduced to downloadable movies and music, which were mostly available through iTunes and torrent software like LimeWire. This was an improvement over VHS and DVD, but you still had to download the content to watch it (and it could take anywhere from 30 minutes to 3 days to download). Once again, the friction was tugging. 

Now we’re at the point where streaming is king. Netflix, Hulu, Spotify, Beats, HBO…every content producer already offers streaming, or is planning to at some near point in the future. Still, there are some holdouts. AM/FM Radio is still popular among certain demographics. Podcasts are becoming increasingly more popular, but still not popular enough to be labeled mainstream. What’s more is that podcasts are still mostly downloaded through iTunes or your favorite podcast app (I shuffle between Pocket CastsOvercast, and Castro at least twice a year). This will change soon. Podcasts will become radio, and radio will be streamed. Some radio stations already offer podcast versions of their shows (NPR, Bloomberg Radio, and many more), but I’m sure most people still listen through traditional means. Cars will be equipped or be more easily parable with smartphones in order to stream shows and music in 5–10 years (I’m talking about mainstream here, not luxury $40,000+ cars). 

4: Virtual Economy

The fiat dollar was one innovation that spread like wildfire. The next natural step is a wholly virtual economy. Apple Pay, Google Wallet, Square Cash, Venmo, and the hundreds of other payment apps already make physical currency irrelevant. But again, they’re all technologies used by technocrats, and not the mainstream public. Most stores still don’t accept mobile payments, although this is changing rapidly. I expect to see mobile payments for shopping to become totally mainstream (75%+ adoption) within five years. We’ll be going to supermarkets without our wallets and only with our phones/smartwatches/future wearables. Paying at the pump will be a similar ordeal. I can already go into Walgreens with only my Apple Watch to buy a bar of soap and some Colgate toothpaste, but not all companies are as forward looking. That’s why I’m giving them five years to catch up. 

I wrote about the state of financial technology (fintech) a few months ago, which includes the aforementioned payment apps in the previous paragraph. In this next one I’ll talk about the virtualization of investing. There’s a huge amount of startups that will take your money and invest it for you in diversified portfolios. In the old days, you had to schedule a lunch meeting with your broker to discuss the performance of your stock portfolio. A little more recently, you would have had to at least pick up the phone and give them a call. Now we’ve got apps like Wealthfront, Betterment, and Robinhood that promise to provide you with the same performance through well-designed mobile apps that are powered by complex algorithms. The metric used to gauge the popularity of these companies is Assets Under Management (AUM), which in English means how much client money they’re actually holding. Thus far, these robo-advisors are still a small percentage of the total investment base, but it will undoubtedly increase in the future as traditional investing companies make robo-advisor services of their own (Charles Schwab and Vanguard already started offering their robo-advisors services). 

Unlike mobile payments, however, robo-advisors and other investment vehicle (investment vehicle - doesn’t that sound great and important?) services will take longer to propagate. Most people are extremely conservative with their investments. After all, these are your life savings that we’re talking about. These robo-advisor startups will need to tackle the psychology of investing before they make any other breakthroughs. For this reason, I’m guessing it will take five-ten years for them to truly become mainstream. 

5: Educational Shakeup

This one bothers me a lot. I would be more willing to accept the theory of survival of the fittest as it applies in business if not for the for-profit education industry. I was sure that by the time I entered college, all textbooks would be all in digital form. But here we are, four years later, and printed textbooks are still in final, dominant form. Some publishers offer digital versions of their books, but the interface is such an atrocity that I would rather buy a printed copy of the book. Of course, some students are mischievous cheapskates and find older PDF versions of the book from undisclosed sources in unidentified locations - sources familiar with the matter tell me this is the case anyway.

Online classes are popular now, but you’ll be hard-pressed to find a student to tell you (honestly) that they’re actually academically helpful. The material may mirror that of a regular class, but watching pixelated low resolution videos of PowerPoints narrated by monotonous voices makes me think we can do better. Interactivity is key. You should be able to click items on the video to see annotations, practice problems with clear step-by-step explanations, and be able to contact the teacher at any point during the lesson as you would in a normal classroom. Some online learning websites got this right, but they’re not degree-bearing institutions so how much do they really matter at the moment? Most people I know use and love Khan Academy, but until you can get a valid bachelors degree from these institutions, their value is capped to a minimal amount. 

Academia moves notoriously slow, so I will have to place an educational revolution farther on the timeline: 15–20 years. That’s when colleges will offer fully featured online classes that replicate the in-class experience. Alternate/Virtual Reality technology may help with this, but at the end of the day it’s time that does the innovation in the educational milieu.

6: Drones

Full disclosure: I’m not very qualified to talk about drones because I follow the topic only lightly, but I have a hunch that it will be meaningful sometime soonish in the future…five-ten years max. My reasoning is simple. You look at drone technology and you can just tell how much can be done with it. Construction, photography, travel, military, espionage, delivery…these are all applications that immediately come to mind. The major obstacle for drones will be government regulation. The drone companies that traverse regulation well will succeed. Those that don’t will fail. 

Coda 

This isn’t a comprehensive list. It’s a list of bigger items that I think will be breakthroughs in the coming two decades. There will undoubtedly be disruptive technologies that I have missed, but that’s because they’re impossible to predict with any certainty (see a technology palm reader for that). Hopefully this site will be around in 20 years for us to grade my scorecard.