CONTRIBUTORS
Matthew Moberg
Portfolio Manager
Franklin Equity Group
United States
Emily Elott
Portfolio Analyst
Franklin Equity Group
Preview
The past 50 years of innovation were about the byte. We think the future will be about the atom and the gene. Our focus in this paper is the atom, specifically how advances in production may alter the physical world—transforming cars, robots, drones, medical devices and drugs and creating new modalities never considered before. These products will be variable and complex and upend the manufacturing status quo. With this shift in mind, we make the case that the new heroes in business will be producers. We try to break the myth that production is unprofitable, commoditized and largely not investable. In this paper, you will find three business models selected to show production as an engine for long-term profitability and value creation: technological competitive advantage, scaled economies shared and personalization.
Key takeaways:
- In the Fourth Industrial Revolution, production will play a key role. New technologies will disrupt current ones, creating new winners. The general-purpose technologies we have identified so far include electric vehicles, clean energy, artificial intelligence, robotics, and genomics.
- We are already seeing production gain in importance in the case of the big tech companies, who were once asset-light and are now spending heavily on capital expenditures.
- The skillsets are different for inventors and producers. A successful innovation requires both.
This is an optimistic time—that technological progress compounds on itself has never been more apparent. Yet, if the digital revolution was a disappearing act, where the world dissolved into the computer, the wonders of this next era will spill back out of the machine, coming to transform our physical world. We have always needed both dreamers and producers, but the stories of innovation have tended to favor the former. Now, the pendulum of history is shifting toward the Boschs, Cooks and Changs—those talented individuals who take inventions out of the lab and into the world.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
Active management does not ensure gains or protect against market declines.
Investment strategies which incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner.
Focusing investments in technology-related industries carries much greater risks of adverse developments and price movements in such industries than a strategy that invests in a wider variety of industries.
To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.