General Purpose Technologies
A genuine innovation is an innovation that profoundly changes societies, economies, industries and consumer behavior. We refer to them as ‘general purpose technologies’ or GPTs.
GPTs have an impact on three different levels:
| 1. | Transaction costs |
| GPTs provide transparency for the market participants and consumers and this, in turn, affects transaction costs. For example, farmers in Africa can receive text messages with relevant market prices for their products through their mobile phones. On the basis of these prices, they decide whether and where they want to sell their goods. Previously they had to travel for hours to be physically present at the market in order to know market prices. | |
| 2. | Market reach |
| GPTs have the ability to deepen existing markets and create new ones, allowing producers to reach more consumers. The higher market potential results in economies of scale and improved profit margins. However, these gains are temporary and will eventually be passed onto the end consumer, thus lowering consumer prices. The knock-on effect will be higher real disposable income for consumers and this, in turn, will be reallocated to other consumer goods sectors. | |
| 3. | Boundaries of growth |
| Lastly, by definition, GPTs are bound by design. To illustrate this, consider how the introduction of railroads transformed local and regional economies into national economies and how the internet gave rise to a single global market place. |
Cyrte believes the Internet and ICT to be the most important GPTs of our time. Compared to previous GPTs, the internet and ICT are unique. Older GPTs were a new form of transportation, communication OR production. However, the internet is inherently three dimensional and is a new form of transportation, communication AND production.
We apply an investment philosophy based on re-allocation of disposable income