How to Invest in Tomorrow’s Tech Trends Today
We put the question to Jerry Yang co-founder of Yahoo!
3 min
Which companies, public and private, are best-positioned for the next 100 years—or at least the next few years? We put the question to Jerry Yang, founding partner of AME Cloud Ventures and co-founder of Yahoo!, and a member of Barron’s Centennial Roundtable. Yang, a longtime venture capitalist based in Silicon Valley, has seen his share of start-ups and innovations. He highlights some of today’s most promising companies and trends in the edited interview below.
Barron’s: Which companies excite you these days, and why?
Jerry Yang: I’ll start with Zoom Video Communications [ticker: ZM]. Never in a thousand years would we have thought that ‘Zoom’ would become a verb in this context. This company took the opportunity to become massively skilled in the past 15 months. In hindsight, we might say it was easy for them to have done that, but they had to overcome a lot of privacy and scale issues. They really matured in a hurry. The future for video is huge. How do we enhance it? How do we make video more intelligent and productive?
Will the future belong to Zoom or a host of competitors?
From the big competitors to start-ups, everyone is emulating or attempting to catch up to Zoom’s capabilities. Zoom has announced a platform marketplace for applications. It is adding more intelligence to its platform, and more productivity tools. In my view, by launching an app store of sorts, Zoom can create an ecosystem that is a defensible barrier to competition.
Zipline, an on-demand delivery service, is another company to watch. It operates fixed-wing drones that carry a few kilograms of payload. They can fly 160 kilometres round trip. When they reach their destination, they drop an insulated package with a parachute. Zipline was founded in Silicon Valley, but its first scaled deployment is medical supply in Rwanda, Africa. Zipline delivers blood supplies and critical medicines. It continues to scale. It is an incredibly exciting company.
Do you expect Zipline to go public in the next few years?
That’s a good question. Companies are raising as much money now in private funding rounds as they would have in an initial public offering. IPOs help with branding and maybe create a new investor base, but if a company just needs capital, there is plenty in the private market. From 2012 to 2015 or ’16, there were few companies coming public. The IPO market goes in cycles. With today’s abundance of low-cost capital, private companies can take risks and have the money to grow.
What other industries or companies look promising to you?
In the area of artificial intelligence and drug discovery, we invested in Recursion Pharmaceuticals [RXRX], which went public in April. Recursion is based in Salt Lake City, which has become a hotbed for biotech start-ups. The company uses massive data computational tools, lab robotics, and a petabyte-level database to speed up the drug-discovery process. Zymergen [ZY] also operates in an area I’m pretty excited about—biofacturing. This is a materials manufacturing company, using AI, automation, and biology for scale manufacturing.
How does biology fit into the equation?
Instead of using chemicals, for instance, they’re using yeast fermentation to make new materials and products—from new electronic displays to naturally derived bug repellents. Ginkgo Bioworks is another biofacturing company I’m excited about. More broadly, the birth of genetic sequencing launched a whole industry that’s exciting, including gene editing. Synthetic biology is at an early stage, but we’re already starting to see companies come to fruition, such as Twist Bioscience [TWST], which manufactures and sells synthetic DNA-based products. The world will need more of these technologies in coming years. Ten years ago, we hadn’t “printed” a single gene. Now we’re printing tens of millions, and that will go to billions in the next few years.
What other technologies should we be watching?
I’ll emphasize a couple of trends. We’re moving into a world where cameras will be smarter. Whether cameras are manned by Zoom apps or cars or your watch, they will be equipped with more sensors, and the sensors will get smarter. That means more data will be fed into the cloud. We’re also seeing huge investments in natural-language processing. A lot of theoretical work was done in this area, and now we’re starting to see practical applications. All of this means the cloud is getting smarter. We’re going to need a lot more bandwidth. If we build bandwidth, the applications will come. Sensors and devices will be communicating with each other, without human intervention. That’s another massive source of new data that will come online.
The idea of using biomaterials in sensors is still in the research lab, but it’s something to watch. Sensors made of carbon, instead of silicon, could be much more responsive to an individual’s biology.
We haven’t talked about longevity. Science tells us the average life span for today’s teenagers could be well beyond 100.
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It’s a slow start for 2024 but the longer term outlook for the local economy is strong
3 min
The International Monetary Fund (IMF) has described the global economy as “surprisingly resilient” amid rapid interest rate rises to quell high inflation since 2022, post-pandemic supply chain disruptions, a short-term spike in energy prices due to the war in Ukraine and increased geopolitical tensions involving China and the Middle East.
The IMF’s biannual World Economic Outlook report says the world has so far avoided stagflation and recession, with large pandemic savings enabling households to cope with higher rates and inflation, and strong immigration in advanced economies creating unusually tight labour markets.
IMF economic counsellor Pierre-Olivier Gourinchas said most indicators point to a soft landing for the global economy and the IMG now expects “less economic scarring from the pandemic”. He noted that markets had reacted exuberantly in recent weeks to the prospect of central banks lowering interest rates soon.
However, the IMF says global growth will moderate over the next five years to its lowest level in decades. It projects 3.2 percent global growth in 2024 and 2025, the same pace as 2023, with still-high borrowing costs, the withdrawal of fiscal support and weak productivity growth weighing economic activity down.
Australia is expected to underperform other advanced economies, especially the United States, this year but will surge beyond them from 2025. The IMF predicts annual gross domestic product (GDP) growth of 1.5 percent in Australia in 2024, which is well below our long-term pre-pandemic average of 2.5 percent. The US is expected to book above-average growth of 2.7 percent in 2024 and the world’s advanced economies are tipped to average 1.7 percent growth.
Australian economic growth will then move above other advanced economies and maintain upward momentum through til 2029. The IMF predicts 2 percent GDP growth for Australia in 2025 and 2.3 percent in 2029. For the US, the IMF expects 1.9 percent growth in 2025 and 2.1 percent in 2029. For the advanced economies in aggregate, the IMF forecasts 1.8 percent growth in 2025 and 1.7 percent in 2029.
The IMF said higher interest rates had had less effect on the US economy compared to Australia because most US mortgages are on long-term fixed rates and household debt has been lower since the global financial crisis. In Australia, most loans are on variable rates and therefore immediately impacted by every rate rise, household debt is high, and housing supply is restricted.
“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” said Mr Gourinchas.
An example of unusual fiscal policy is the Inflation Reduction Act, which includes US$369 billion in new spending to encourage green energy investment. “This raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy since it risks pushing up global funding costs,” he said.
While things are going well now, Mr Gourinchas said risks to global economic progress remain.
“On the downside, new price spikes stemming from geopolitical tensions, including those from the war in Ukraine and the conflict in Gaza and Israel, could, along with persistent core inflation where labour markets are still tight, raise interest rate expectations and reduce asset prices. A divergence in disinflation speeds among major economies could also cause currency movements that put financial sectors under pressure.”
Mr Gourinchas said growth in China could falter, hurting trading partners, without a comprehensive response to its property sector downturn. “Domestic demand will remain lacklustre for some time unless strong measures and reforms address the root cause. Public debt dynamics are also of concern, especially if the property crisis morphs into a local public finance crisis.”
He also noted that weak productivity growth remains a challenge for the whole world and “much hope rests on artificial intelligence delivering strong productivity gains in the medium term”.
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