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How To Invest In The Next Century

Michael Bagguley
Nov 15, 2018 · 7 min read
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We’re seeing a confluence of two trends taking shape regarding the health of Americans. Millennials and Generation-Z are conscious of the ethical and ecological origins of their food, but at the same time are dining out and buying prepared food at a higher rate than previous generations. So far, one of the first movers in this space, Blue Apron, had their IPO go largely unsuccessful. Are there any players in this space that you’re watching, that could be the future of this space?

As people get more affluent, they get more health conscious. And clearly over the past 50 years, life expectancies have gone up and people live into retirement. So I think we’re going to experience a shift in healthcare from reactive medicine to preventive medicine. We’re used to thinking of medicine as helping us with an acute problem, putting a cast on a broken arm or getting a flu shot. We’re going to move beyond that and try to stop these problems before they begin, and your nutrition is definitely a part of that.

Likewise, the emergence of the service economy will play a role in this. One service I personally use here in the UK is Mindful Chef. What’s interesting about this company is it’s not a random meal. It’s sort of tailored to a specific demographic. Their meals don’t contain any refined carbohydrates and the emphasis is on a good, fresh meal.

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When discussing these companies like Mindful Chef and Blue Apron, the emphasis is usually put on the delivery, that these are meal-delivery companies. I’d say that they’re in the meal design business. There are heaps of food delivery services, but the differentiating factor is that they design a meal for you, and give you the right amount of the right ingredients. So this will also eliminate waste. Most of us buy 120% of what we need at the store right now.

Peter Thiel says the day where humans can live forever is not far away. Perhaps he is exaggerating, however, the life expectancy is expected to steadily increase. This will have profound implications on healthcare, retirement, investing, and work in general. What aspects of a longer life expectancy do you view as most significant?

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I think when discussing the life expectancy extending, you basically have two age groups: people older than 85, and people younger than 85. This is for the simple reason that many are living beyond 85 years, but around this age, it gets really tough.

Clearly, people living well beyond 85 has some profound implications with regard to retirement, healthcare, government spending, personal finance, and investing. Just fifty or so years ago, people died shortly after retirement. Now, people must stretch their retirement savings for twenty years or more.

There’s some interesting work being done in Manchester, where they’re questioning medicine’s conventional wisdom. They’re saying “I’m not sure that when an 85 year old walks into the hospital, they should get six different tablets. One for blood pressure, one for their heart, etc.” They’re looking for the root cause of these health deficiencies, so these people can take one tablet, constraining the number of pharmaceuticals you need to take. This is an idea that would have profound effects on the pharmaceutical industry, which is already an industry at an interesting point. Due to the aging population, governments are spending more on healthcare, and will pressure these pharmaceutical firms.

The amount of facilities to house and monitor the elderly is limited and needs to grow. I don’t think there’s a developed country that is approaching this correctly at the moment, so there’s lots of opportunity here.

If you want to toy with a brutal view of the world, The Economist recently published a piece about how smokers benefited the economy: they paid high taxes, died early, and didn’t use a lot of government funds to treat them in old age. Smoking is dying out and being replaced by sugar-driven obesity. However, the sugar consumers don’t die that much earlier, don’t pay that much extra tax, and generally are more expensive to the healthcare system.

What do you make of the rise in ‘impact’ or ‘ethical’ investing? Critics cite that when it comes to investing, financials come before all, while proponents counter that the firms they invest in have more sustainable business models and are poised for long-term growth. Do you see this continuing as a niche within Wall Street, or the future of investing?

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I think the rise can be partly attributed to the fact that institutions don’t want to be caught up in things that taint their reputation. They’re getting more brand-conscious. For instance, the biggest sovereign wealth fund is Norway, which is over $1 trillion, invests their funds ethically. So I expect it to trickle down.

When you get away from the brand issues and you question if it’s just good business, I think it is. I think avoiding companies involved in unethical acts can help investors dodge bullets.

Back in May 2018, the US Supreme Court overturned a federal ban on sports betting. Is this an industry big data can disrupt? Traditionally, sportsbooks rely on the proprietor’s ability to model an event better than the betting market. Can the right technology allow one sportsbook to drastically outperform the rest of the market?

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Managing risk is a huge part of sports betting. Unlike a trading floor in a bank, where they can hedge most of the trades they make, it’s not as simple in the sports betting world. When a big whale comes in and wants to bet the house on a certain side, there’s the chance that his analytics are better than yours. So of course technology and data is the solution.

When it comes to the future of manufacturing, and applying technology like mixed realities and robotics, what do you think will differentiate the clear winners in this space? Do you see it being existing firms that adjust to the climate and invest in new tech, or startups disrupting the industry? How can existing firms prepare themselves?

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I think in recent history, it seems like tech firms are unstoppable, that they do everything better than everyone else. I think we have to be careful with that line of thinking.

We’re seeing a version of this in the auto industry right now. German firms like BMW and Audi have amazing mastery when it comes to auto production. While a company like Tesla, for instance, has an amazing car but they’re having so many production issues. So you just have to think, that if they hired someone senior from BMW to run production, they’d be killing it right now.

Looking at the current landscape when it comes to applying technology to the manufacturing process, you have to assume that some of the existing auto companies will do well. I think BMW could end up doing very well, because they’re really good at making cars, they know manufacturing. And going back to Tesla and observing their manufacturing troubles, there’s an important lesson there. The disruptor (Tesla) doesn’t always do it better. They might just change things.

It’s a question you see in a lot of industries: will technology firms replace banks, for example? Look at Amazon, they didn’t come into the space and say “we’re these tech guys and we’re gonna disrupt your industry and do it better than you.” It was simple, they printed the book when you bought it. We think of Amazon as this amazing technology company but the technology behind the book never changed until the Kindle. They changed the way we buy books, not the way books are made.

Every decade we see some industries die. What industries do you see dying in the next 10 years? What are the Yellow Pages and phone booths of the world right now?

I think there’s a strong possibility that cannabis can largely replace tobacco. Cigarettes are already dying, and vaping is taking its place. Once cannabis is fully supplanted into culture and legal, I think there’s a strong chance the tobacco industry contracts over the long term.

There’s real potential that the oil & gas extraction industry can collapse faster than we think, with the emergence of renewable energy.

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Michael Bagguley

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Data Driven Investor

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Michael Bagguley

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