How Technology Has Changed Private Equity Investment
Private equity is carrying the burden of responsibility for technology, good and bad.
Most private equity firms do not have sophisticated technology knowledge, except they all know, by now, they need this in order to succeed, and prosper. So, this has changed investing all the way around, and you see some of this in financial markets, but not all of it, yet. People are unaware of how what they don’t know will impact them, because there is a mandatory non-sequitur in this sentence (there is always a non-sequitur involved when you discuss knowledge).
Normal investment depends on a balance sheet and an income statement. However, these are not going to do the job in the current environment because technology has completely changed the factors of production (the basic economics involved). For one, intangible assets are not valued (and these are, today, the most valuable). And another, technology departments within companies cannot be accurately assessed (because technology is changing too quickly).
Also, national and international boundaries are erased by technology (companies). So, the balance of power has shifted from government to business. Meaning, regulatory measures that protected businesses, and the general population, before, no longer do the job today,
Statistics don’t do the trick either, since they are based on a strict rendering of zero and one (one hundred percent, which may not be feasible, ever). And, as everyone knows, and signs-off on regularly, history does not predict the future (though half-the-time it does). Uncertainty is underestimated (50–50 is the only probability that matters). And, statistics can be slanted just by moving the timeframe.
Also, in traditional environments, goods and services are priced independent of time constraints, or labor overages. Ideas and smart people are great, but what about time? And, there is a real question out there, which is, definitely, being asked, but not aloud. Do we have too many people on the planet? Technology has, definitely, broken the law of identity.
Then there is the aging population and health care and who is going to pay for the expectations of an entire generation health-wise? You’re talking a couple of billion people. There are the ethical issues of pricing involved, which are not going to be resolved any time soon. There is the burgeoning migrant population, that, via smartphone, seeks a better life somewhere other than where it is now.
There is the fact financial assets in banking institutions are only protected by 1/10 reserved cash. There is the fact weapons of mass destruction are in those places where destruction is as normal as construction elsewhere. There is the certain threat of cyberterrorism, and, we all know this, and are waiting for it, in one way or another. You can list many more issues with investing than I have listed here. Perhaps you cannot call it investing anymore.
But, just to be balanced, here, if nothing else, there is, also the upside (50–50). Technology, and the technological use of intelligent, creative, people, holds unbelievable promise to solve all these problems and more. So it is going to be up to the private equity firms who are making important choices about what will get done, when, where, how, and, most important, why. No one else has that much power. And, it is definitely not centralized. We are aware. Hopefully guided. By something. Intelligent. Really.
Conservation of the circle is the core dynamic in nature.
