The Internet of Things

As Hurricane Dorian barreled towards the east coast in late August, many Tesla owners in the storm’s path learned that their cars had unexpectedly and thankfully acquired the ability to drive much farther on a single battery charge. Modern day vehicles can be considered the ultimate personal computer device. Not only do today’s cars have awesome computing power, but many, including Tesla’s full lineup, are connected to the internet. Software in Tesla’s less-expensive models inhibits the full function of the battery in order to limit their range. In late August, Tesla tweaked the software to remotely give targeted vehicles temporary access to the full power of their car’s battery.

The Next Revolution

As the cost of computing, data storage and connectivity have continued to decline, it has become easier to incorporate systems into everyday objects. The price of computation today is roughly one hundred- millionth what it was in the 1970, when microprocessors first became commercially available. Even cheap, battery-powered chips now offer performance better than the super-computers of the 1970s. A megabyte of data storage in 1956 would have cost about $85,000 in today’s dollars. It now costs just

$0.00002. Connectivity continues to increase, and related costs continue to decline. The International Telecommunications Union, a trade body, estimates that 51.2% of the world’s population had internet access in 2018, up from 23.1% just ten years ago.1

At its core, IoT represents an environment that contains connected devices (anything with a sensor), and applications that process information gathered from the devices (anything from a social media app or an e-commerce platform, to a manufacturing system or a home climate system). IoT will drive the so-called

Fourth Industrial Revolution – a term used to describe the sociological and economic impact of big data, artificial intelligence and robotics.

Connected devices are everywhere. In the last two completed calendar years, more than 100 million smart speakers were purchased worldwide. As of December 31, 2018, there were more than 5 billion connected devices worldwide.1 Computer chips are now installed in countless everyday objects.

Contact lenses can analyze tears and provide information directly to doctors. Wearable devices gather and report data on fatigue, appetite, blood

pressure and heart rate. Homes include smart safety systems, plugs, thermostats and locks. Smart mirrors display weather conditions and various notifications from your smart phone. Google Glass allows instantaneous, contextual interaction with the digital world – hands free. And driverless cars, with broad connectivity to their surroundings will provide the ultimate convenience in transportation.

Of course, connected devices are very useful in business. Systems have been developed to forecast machinery maintenance requirements. Sensors have been imbedded in concrete to identify breakdown. Bridges and tunnels include monitoring devices. Smart commercial buildings can track usage and pedestrian traffic, and reduce operating costs. Such systems can also track employee productivity and/or customer habits. Insurance companies are developing surveillance systems to track policyholders. One Florida mega-church uses a tracking system to monitor attendance. Farmers use IoT systems to track the health of their crops as well as their farm animals, maximizing productivity.

IoT is big business

Bain Capital, a management consultancy, forecasts that total spending on IoT will reach $520 billion by 2021. As stated in a recent PricewaterhouseCoopers report, the “Internet of Things is transforming the everyday physical objects that surround us into an ecosystem of information that will enrich our lives. From refrigerators to parking spaces to houses, the Internet of Things is bringing more and more into the digital fold every day, which will likely make the Internet of Things a multi-trillion-dollar industry in the near future.”

We recognize the importance of this and related technologies, which is why most of the portfolios we manage have 20% or more of equities invested in the technology sector. Client portfolios include many companies that can continue to benefit from growth in this area, from chipmakers and system developers, to innovative companies incorporating IoT that are otherwise outside of the technology sector.

Brendan O’Brien, Chief Innovation Officer at Aria Systems, has said “If you think the internet has changed your life, think again. The Internet of Things is about to change it all over again!” We agree. And we are invested to take advantage of this groundbreaking technology.

1The Economist, September 14th-20th, 2019

The information has been obtained from sources considered to be reliable, but we do not guarantee the foregoing material is accurate or complete. Any opinions are those of Steven Criscuolo and not necessarily those of RJFS or Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Sector investments are companies engaged in business related to a specific sector. The companies engaged in the communications and technology industries are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.

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