Global e-Commerce For Investors

 
I'll reluctantly admit that I've been excessively slow to realize what has been driving the economic prosperity we've been enjoying for the past ten years. I'm now convinced it's due to a combination of fewer trade restrictions around the world and the benefit of productivity gains from electronic automation.

There has been an historically unprecedented change in the laws of hundreds of countries to remove trade restrictions in the past twenty years. The World Trade Organization has been working to negotiate changes in tariffs, duties and other laws that impede cross border commerce. The North American Free Trade Agreement has made Canda, the US and Mexico the largest open trade block in the world. The European Union is removing thousands of legal barriers to trade among their member countries. Producers and marketers throughout the world have far more choices for raw materials or finished goods to use in production or put on their shelves. Consumers have access to less expensive goods. Even though formerly protected industries may be losing ground to foreign competition, the economic benefits outweigh the costs for those who have been able to adapt to new kinds of work.

Meanwhile, what began as little more than a toy about twenty years ago has become the engine driving huge productivity gains in large and small businesses throughout the world. Forty years ago, only the largest companies and the government could afford computers. In 1966, I was the chief accountant for an insurance company that paid $240,000 a year to rent an IBM 360 main frame computer. We had a staff of more than 25 computer operators and programmers to help the rest of the company to make use of this marvel of science. We paid $100,000 to license a computer program to do our accounting and another $50,000 for a program to help us manage our investment portfolio.

Around 1978 or 1979, the founders of Apple Computer company took what was a do-it-yourself kit for electronic enthusiasts and pre-assembled it into a ready to use personal computer called the Apple II. Radio Shack soon followed suit and the personal computer industry began. Those early computers were tiny by any standard, but the technical advances were fast and extensive. By the mid eighties, a $5,000 desktop computer had as much memory and storage capacity as the huge IBM 360 in the mid sixties. By 1990, a $2,500 desktop computer had the power and capacity to become a serious tool for research and work. The cost of computer storage began to fall dramatically in the mid-90s. There was an incredible surge of new and better software products to help computer owners to make more effective use of their computers. By the end of the century, the desktop computer was more powerful and faster and had more storage capacity than the "super computers" of just twenty year before. It won't be many years before you will be able to buy a computer for $100 that will have the memory capacity and speed of a $1,000 computer at CompUSA today. Like the t.v. set, we will soon have a computer for everyone in the family.

While many of us think of the personal or desktop computer as having been around for a long time, it's really just a technological infant compared to the telephone, the automobile and hundreds of other labor saving devices. The gains we have seen are modest compared to what is in store for us in the next decade. Think about the economic impact of a computer comparable to the best desktop computer of today that would sell for as little as $200 in five or six years? Or what about a system where people could have a terminal with memory that is hooked up to an online system where they could pay for the unlimited use of software and data storage for as little as $10 a month?

Personally, I doubt if the development of the Internet and the world wide web has had enough time to make a really dramatic impact on global productivity. I therefore don't include the Internet as one of the major trends that have affected recent productivity gains and the economy of the past ten years. But I do believe it will be a major factor in lowering the costs of most products and services greatly in the next ten years. I believe it will have a far greater impact on business to business transactions than on selling to consumers.

Investors need to be aware of these trends and to stay abreast of new developments. Many older industries will suffer from these changes as new industries emerge to take their place. New companies will displace older ones that are not able to adapt to the new kind of commerce. As an investor, you can elect to give your money to a mutual fund money manager or to a financial planner who will hopefully have the vision to see these monumental changes that are happening every day. But just to be sure, it wouldn't hurt for an investor to keep abreast of these changes. Once in a while, there might be news about an exciting new product that would justify some direct investment. And -- some of those hot new products may be produced from companies that are not sold on any US stock exchanges.

However, please note that profiting from investments in companies that are on the cutting edge of technology does not necessarily mean buying the latest high tech stock. Some of the better buys will be stocks of companies in basic industries that are leading the way in their industry. Walmart was a leader in the use of technology in retailing but it was far from being known as a technology company.