How Will Technology Trends Impact Your Portfolio?

Panelists and backgrounds

• Jeff Schumacher (BCG Digital Ventures): First job was mowing lawns.
• Nicole Musico (Ontario Teachers): First job was a gym teacher and gymnastics coach.
• Morris Mark (Mark Asset Management): First job was delivering flowers at a quarter per shot.
• Dan Premack (Axios): First paying job was a DJ at a radio station.
• Colin LeDuc (Generation Investment Management): First job involved working in a factory making ammunition boxes.
• Jason Greenberg (Jefferies): First job was collecting range balls at a golf course.

Technology as a portfolio and business lens

• Ontario Teachers views technology through three distinct lenses: direct investing, risk mitigation for portfolio companies, and internal enablement for asset management capabilities.
• Morris Mark argues technology is no longer a standalone sector but is embedded in almost every economic sector, including telecom and retail.
• Jefferies reports a structural shift where 55% to 65% of technology deals in the last year were acquired by non-technology buyers (private equity and industrial firms).
• The dominant M&A trend involves verticalized technology acquisitions by companies like Walmart (Jet.com) and GM (Cruise), impacting supply chains and business models across all industries.

M&A Buyer Competitiveness and Cultural Risks

• Jeff Schumacher ranks buyers from most to least cynical/experienced: Technology buyers (most experienced) > Private Equity (very sharp) > Non-technology industry buyers (often lacking breadth of experience).
• A primary disconnect in M&A is cultural incompatibility between tech startups (Northern California style) and traditional industrial conglomerates (e.g., German-based).
• Non-technology buyers often fail to grasp the nuances of tech culture, leading to integration challenges.

Key Investment Themes and Trends

• Blockchain and Decentralization:
  • BCG Digital Ventures is focusing on "third-generation" blockchain protocols to solve issues of power consumption, performance, and identity verification.
  • The firm seeks to democratize value by removing intermediaries, potentially shifting value to users via tokens or "gas" rather than central corporations.
  • Use cases include supply chain tracking (food, diamonds) and fake news elimination.
• Sustainability and Mobility:
  • Generation Investment Management is prioritizing sustainable technology in energy, food, cities, and mobility over standalone "clean tech."
  • Battery technology costs are following a steep downward curve driven by demand from three sectors: consumer electronics, energy storage, and mobility.
  • Specific portfolio highlights include Gogoro (battery-swapping electric scooters in Taiwan) and Proterra (electric buses achieving 1,200 miles on a single charge).
  • The panel anticipates the commercial rollout of electric flying taxis (vertical takeoff) in major cities within a five-year window, likely starting with tourism routes.
• Tesla and EVs:
  • Mark Asset Management holds a small position (0.1% of assets) in Tesla, citing its lead in integrating computing and autonomous tech, though they remain skeptical about mass production profitability.
  • Ontario Teachers views Tesla as a catalyst that legitimized the EV market and spurred supply chain innovations across infrastructure and private capital.

Regulatory and Geopolitical Headwinds

• Regulatory flux is identified as the most significant disruptive factor, with technology outpacing municipal and international rules (e.g., e-scooter regulations in SF, Uber restrictions).
• Trade wars and protectionism are viewed as value-destructive for US technology companies, which rely on global market access to maximize value.
• M&A deal approvals are becoming increasingly difficult due to unpredictable antitrust scrutiny across multiple jurisdictions (CFIUS, MOFCOM, EU).

Industry Resistance and Disruption

• Construction and home building remain largely insulated from productivity gains, with worker productivity reported as flat or declining due to labor intensity.
• Education disruption is characterized as a "human-centered design" issue rather than a pure technology problem, noting that tools like iPads failed without pedagogical redesign.
• Financial services face disintermediation risks, with the sector's GDP share potentially shrinking as blockchain and AI reduce the need for traditional intermediaries.

Future Outlook and AI

• AI is viewed as a foundational enabler (like the cloud) that will eventually disintermediate formulaic and rote tasks in finance and banking.
• Investment banks are expected to "barbell" their workforce, retaining high-level strategic thinkers while eliminating middle-layer process roles.
• The "moats" of current tech giants (FAANG) are deeper than those of previous eras due to network effects and massive capital expenditure (capex) on data centers, creating barriers for new entrants.
• Jeff Schumacher notes that most failed bets in his experience stemmed from being "too early" rather than a lack of product-market fit.

Talent and Organizational Strategy

• Asset managers are recognizing a critical shortage of in-house technologists and are rethinking talent acquisition to hire former tech company engineers.
• Ontario Teachers emphasizes the need for a 10-year lens on talent retention to support long-term tech strategy execution.
• The consensus is that the pace of technological change is exponential, requiring organizations to move away from linear planning horizons.