Why Private and Family Office wealth is seeking a new path and new direction?
Family Offices and UHNW are making significant investments in Deep Tech…
In the past few years since working alongside wealthy families, ultra high net worth people and the newly anointed billionaires, who have made their fortunes much faster that previous generations, there has been a number of shifts in not only their behaviours but also in their appetites towards proportionate risk taking and impact investing. With one notable big shift the move towards ‘Deep Tech’.
Why this is a move masks much deeper issues for the investment management community?
Many families and UHNW are looking to break free from traditional Wealth and Asset Management shackles, with the competing attitudes of the new generation collides with the conformist strategies of the older generations that insist on a traditional balanced and diversified portfolio is now being questioned. Traditional strategies are often so balanced and so diversified restricts the massive upside potential, given most strategies rely on real estate increasing in value, prefering fund of funds, blue chip equities and a smattering of bonds as cornerstone investment strategies.
But with real estate sliding and becoming more illiquid than before in certain regions, the search is on for the best performing options which is drawing this audience towards tech…but not just any tech.
New money is made quicker…
It is clear the pace of wealth accumulation is increasing with new fortunes created in years rather than decades. Fortunes made in markets that experience greater volatility and movement with operating models based on new technology, leveraging data to deliver insight that scale business models much faster to reach a global audience. A trend that suggests older more traditional investment strategies now struggle with todays approaches given in Asia there have been more than 1000 new billionaires created, and 800 new Family Offices across China, India and other parts of the far East.
But when you look closer, a large proportion of this new wealth comes from deploying Deep Tech strategies and getting their hands on the underlying technology itself... Technology that remains in stealth mode, often in R&D and behind closed doors of the people that already know.
Old dogs, older strategies versus my AI BoTs with their own
Most investment strategies and advisory firms were designed for a different era, when the world was pre Internet, pre iPhone, pre Crypto and pre AI with each evolutionary technology cycle more profound than the last. The impact of packet switching in the 1960’s laid the foundation for the Internet decades later. Alan Turing elector mechanical code breaker in the 1930 layer the foundation to cipher based cryptographically secure computing on which Blockchain is now based. Foundations are often set a decade or more earlier as human behaviours can take many years to accept new tech and the new norm. But not any longer. The new millennial generation are already preprogrammed and ready to go…
Now consider this. We are in a unique ‘all at once’ tech cycle with so many profound advancements happening literally all at once - AI and Machine Learning, Augmented and Virtual Reality, Internet of Things, Robotics, Drones, NLP as we pass Singularity where the machines are advancing quicker than humans can now control.
It is this Deep Tech, which forms a new horizon that changes the fundamentals of commerce, of social interaction and the way in which we see the world. How we consume information, how we vote, the nature and role of work, how people get treated and healed when sick, mass mobility and dare we say mass migration due to climatic shifts. All of which creates new issues for society, and where today 90% of the population have some degree of mental issues and challenges, whether gen X and Z with their digital dementia, or the millennial with their lifestyle focused ‘Likes’ and need to broadcast the Selfie lifestyle, as everyone is more interesting and more successful online, part of the reason for emerging social disorder and increasing suicide rates amongst this age group. As the perception is renewed time and again they are simply not good enough.
Global Wealth has a big problem…and it is not the tax man.
As we approach another Family Office Summit in Monaco in June, I will be presenting new ideas and thoughts on Impact Investing and where to find Value and why the fundamentals now point to Deep Tech as the game changer for delivering great investment opportunities. Requiring deep knowledge, insight and expertise to assess and get access to Deep Tech opportunities. Access that is beyond the reach of 99% of wealth advisors and asset managers, as they have not yet embraced new asset classes and convince themselves the old ways still work. One has to ask therefore why are many Families are creating their own front of house teams for direct investing and work with businesses like ours that are focused on Deep Tech?
Yes we keep going deeper…and yes it is invasive
As we reel from the discovery that Deep State is at the heart of most things bad, influencing our geo-politics, voting outcomes, restricting freedoms and the use of Deep Tech with the apparent closing in on the Cambridge Analytica who had a role to play in various voting. And when you dig deeper the company investors it seems came from a Republican Family Office. The revelations of the Snowden files, the Panama Papers , the Assange leaks and his 1000 year imposed sentence, and yes China and Russia admitting they are escalating hacking, the new Cold War dubbed Cyber Terrorism has merely shifted to Deep Tech.
A question how to reach and control 7billion+ people, individually or in blocks…
The continued attempts by some to undermine and destroy democracy, to crush the notion of the sovereign state has created feelings of new nationalism as the people are becoming aware, despite the news media trying to divert attention, increasing the volume of lies and the misinformation, which the likes of the BBC, CNN and the daily press re-packaged as new old truths.
Let us not forget the revelations of AI driven Deep Fake, where videos of what looks like Barrack Obama and other politicians espousing activist language to, that can be used to fool a nation, to incite war, push racism and layer new political correctness to dumb down the voice of the people. Against a backdrop of redefining the word and the meaning of ‘racism’ defined as a new politicised weapon, to restrict free speech; issues that has been latched onto by the liberals and minority groups, as they want a utopian world.
We are all on the receiving end of Deep Tech and most have no idea of what is really happening.
So Deep Fake…who or what is behind it?
By whos hand?
Human or machine or human first and machine second…
In my view we have already passed Singularity, where the advancement in technology (“AI”) passes the point in which human kind can control things, we will touch on later…
Where to find value? One has to go DEEPer
The world I interact with is far different to the world frequented by Asset and Wealth Managers, who arrive in their plush offices, Saville Row suits and limos that drops them at reception. An inefficient industry, bloated with layers of people validating information, trying to touching the money and assets of the wealthy, so they can justify a fee…
At an Asset Management event in London I spoke at recently, I showed how our platforms can digitise any asset (financial or physical), can create a new financial instrument/asset class that can be traded Time Zero (“T Zero”) for micro fees. A place where we can identify the owners of the asset, trade the asset in a secondary market, secure the asset with custodians, have the asset insured, and always match the holder of the asset with their commercial entitlements, rights and obligations, a do this 2million times a second.
The audience didn’t know what to say, as I continued to explained that our industry will put them all out of business in less than a decade. Because this community cannot deliver value fast enough to the wealthy and to those that hold much of the worlds assets. Assets that remain largely illiquid because current markets and trading options are bloated with inefficient ‘fat cats’, legacy IT systems and intermediaries, brokers and third parties waiting in line with their hands out.
I mentioned that Blockchain as a legitimate transformational technology can remove 50% of operating costs and overheads in less than 6 months. There were many pale faces in the room that couldn’t make eye contact. Mostly operations people that knew what I was saying to be true.
DEEP invasion, mind and body
In recent times the rules of tech investing has largely driven by the VC ‘hope model’ where the partners of funds make bets on which portfolio company will pay for the other 9 that failed and still deliver a profit. Not only does it feel like licensed gambling, it is. And no wonder most of the families are moving away from the LP/GP model as they do not want their capital tied up for 5 to 10 years, and want a say in direction. Investing in tech requires understanding of mainly computer science, investing in Deep Tech additionally requires physics, quantum computing, cryptography, coding and several others specific domains and expertise to make sense of ‘all at once’.
In Dubai in March 2019 we heard from the biggest families announcing new renewed portfolio focus on technology, and as usual in public they don’t give much away. When you talk to them privately this also means they are looking for Deep Tech, opportunities beyond simple payment systems, software applications, mobile apps, CRM, databases, hardware and new devices. So called Tech, and beyond the first wave of social impact projects — alternate power sources, tokenised real estate, new trading exchanges, cannabis farms and new industry models such as healthcare, supply chain.
Although we do not reveal our activities with families, I can tell you this. Investment decisions now happening in Deep Tech because it has the greatest cause and effect on Impact Investing. We are seeing more Families want to be a part of solving the fundamental issues of society and mankind, cojoining socioeconomic with social impact. And the good news is many families have already invested in Deep Tech.
So what is it?
Deep Tech relates to an ‘all at once’ portfolio that combines several branches of tech combined into new infrastructure, new processing capabilities that deliver new insights and outcomes that deliver solutions for hundreds of millions of people at the same time, and reach billions of others, influencing and changing behaviours and monetising interactions. And why Amazon, Google and other tech brands are all over Deep Tech.
Deep Tech solves the biggest issues facing mankind, leveraging the now huge processing power of technology, capable of delivering new insights, challenging and therefore changing and upgrading the rules of computer science, physics and the science supporting mankind. Re-packaged with new front ends and new business models. Synthetic systems, self learning infrastructure, automated processes, and of course AI and machine learning at its colonel.
The blurred lines between the flesh and machine are now undetectable as Deep Fake can attest. Of a time of singularity when the advancement of technology outreaches humans, when machines create themselves, in code that controls machinery (e.g. drones) is already here. Although mainstream is not paying attention, others in high places are all over it. Governments and large companies sit on huge volumes of (surveillance and other) data on everything we do and interact with. The backbone of Skynet.
New generations of Artificial Intelligence where the machines write their own code humans cannot understand, remain hidden, as code is deployed where who knows, which some believe is the first stage of the Rise of the Machines. For me having touched computer science for more than 4.5 decades, the tipping point has already passed. Like a virus that once in the open, it propagates and cannot be retrieved, amended or stopped.
Deep Tech is the realisation that those in power that have the resources can do good things for mankind, but also bad things, controlling the people in new ways. Replacing the old Schuldig philosophies of a Kreditocracy exploiting are areas of technology that the mainstream do not understand, to be invested in and strategically deploy Deep Tech to eliminate the competition and redefine the rules of engagement for business, mankind, and our civilisations next evolution.
I often get asked what is AI? And many have complex answers…
For me its simple: ‘Software code that can write itself and new self, code and a new future mankind cannot understand.’
The issue with AI is of course is bias. As machines, processors and hardware, operating systems and all kinds of code don’t feel, don’t have intuition and cannot make multi dimensional decisions. They are created and formed often under extreme bias by the creators as a starting point, and all further learning starts from this position, as a distorted version of events and truths.
Whilst this is not an advert for the next terminator movie, the implications for machine led bias cannot be ignored, a bias without feeling, of flesh of vulnerability of being human. But then who is making the decisions as demonstrated by the military use of drones that set their own parameters, plan and execute missions is for some a stage before Skynet kicks in.
Deep Tech Investing
At first we didn’t think too much about Deep Tech as we thought the families we speak with were traditional and weren’t ready. Although in many cases true, we started to introduce some of the Deep Tech key concepts and more importantly the projects we were working on and they wanted more.
Families are generally well informed, get great macro data and see the big picture which is essential to embrace and see Deep Tech possibilities. They intutively like big plays, reinventing cities, challenging how healthcare is delivered, solving the water issues, climate change and alternate energy sources. Philanthropic, giving back, social cause, passion projects. Yes. They like to give back but also to make returns over the long term, and above all leave a legacy!
But Deep Tech goes much further than traditional tech investing. Taking on the worlds biggest challenges and problems, changing and influencing the fundamentals of lifestyle, wellbeing, consumerism, government, monetary and voting systems, as the race between those who want to liberate mankind, an those who want to restrict and control it.
We like Deep Tech because it not obvious where the ‘end game’ will be played, or how far reaching the impact will be, but we do know the outcomes have massive potential, and by implication the potential to touch billions of people, soon to become the defaulted new way of doing things…
New Projects, new pathways, new outcomes
We are working with several projects contemplating different aspects of quantum physics, nano technology and AI and quantum computing built on Shor’s Law will redefine security and cryptography itself, albeit we like the look of quantum resistant Blockchains has yet to find their place in the natural order of things…
We are assaulting and knocking down the norms, the generally accepted principles of what can be done in computer science, physical realms and mechanical laws. We are backing new Deep Tech projects, we are becoming part of their infrastructure build, telling their story and delivering their futures.
For example we have plant based alternatives to super bacteria now resistant to common antibiotics, we have nano technology that can ‘cancel out’ toxic waste and clean up industry and the potential to repair the damage we are doing to our planet. Deep Tech that repairs human bodies when they are literally written off. new forms of mass enetertainment, eGaming that engages tens of millions of peoples at once as the people look for and eat new entertainment experiences engaging hundreds of millions of millennials at once.
We love Deep Tech, because it solves the big issues and now Family Offices do to. Combining the very latest technology and thinking, that has already extended past human engineering and understanding.
Are you ready to invest in Deep Tech…?
Author: Nick Ayton is Founder of Chainstarter Ventures Ltd a Family Office advisory firm that specialises in Deep Tech and matching Family and UHNW wealth with the projects that matter.
© NickAyton.com 2019