There's gold in them there hills

What make s a good investment strategy?

With so many mature, well-developed areas of business technology around, it’s hard to find that real gold-plated opportunity in which to invest.

What’s the next best bit of technology people will get into? 

Maybe you should develop a strategy of following a proven engineer or inventor or successful entrepreneur?

In 1985 you might have thought that Clive Sinclair, an excellent engineer, and his Sinclair C5 mini vehicle was the one to pile into; unfortunately, it went bust the same year.

Or you might consider a strategy of following legislation, often a great accelerant of new business opportunities. So, when the UK Government, seeking to encourage investment in green technology, introduced Feed in Tariffs (FITs) in 2008, it seemed to presage a sustainable boom. In the first year, take-up was substantial, and thousands sought to build businesses on the back of putting photo-voltaic cells on houses. But, was it a great investment? No; within a year FITs were cut and three years later they were halved again. By 2015 many companies in the solar panel domestic market had gone bust and, unless they had diversified, there was a queue behind them awaiting the same fate.

OK, so how about a strategy of working out market demand in the developing rather than the developed world? When the English inventor, the late Trevor Baylis, came up with his crank-powered wind-up radio it proved a boon for potential listeners without access to traditional modes of power. After it was featured on television and won a couple of awards, investors clamoured to get involved. It’s not quite clear how much investment return resulted, especially since the mass market for the product was in poorly developed areas with limited ability to pay. The charitable foundation, and later the limited company, he formed to provide support for innovative people and organisations tended to rely heavily on Trevor’s own money to keep it afloat. He died poor.

So, there seems to be no easy way to get it right and many an elephant trap awaiting the unwary investor. Even recent IPO attempts in Silicon Valley demonstrate that being swept along on a wave of enthusiasm is not necessarily going to leave you on an avenue paved with gold.

No need for pessimism though: in 1899 purportedly, Charles H. Duell the Commissioner of the US Patent Office purportedly said, "everything that can be invented has been invented." He didn’t, he was much smarter than that, but the widespread belief that this was so led many to think it was the death knell of opportunities for entrepreneurs to invest in new inventions and discoveries. We all know that is not quite how history reports it.

As an engineer I have always been fascinated by clever bits of technology and as an entrepreneur, those same clever bits of technology that will get real traction in the market.

That led me, just 18 months or so ago, to look at the compressor market. Compressed air was first developed in the 17th century and you might reasonably think that, like many other areas, new developments had been done to death. However, I have found one company which is continuing to advance one of the biggest innovations in the high pressure compressed air industry for 40 years. Despite my engineering qualifications and background, in “compressor world” I feel I am masquerading as an engineer. Here the ‘real’ compressor engineers tell me if you are looking for High pressure ratio in a single stage or a Flat specific power response across the rpm range and something that is lightweight within a scalable geometry, they have designed a product which is, as they say, the best thing since sliced bread which, itself, was first produced in 1928.

That made me think that a better investment strategy might be to look for industries that had not changed in 40 years. What would that be equivalent to? Well, if the rest of the world was behind by 40 years what would it look like?

For a start if you are reading this online while travelling you wouldn’t be since Wifi only came into being just over 20 years ago. And of course, if you wanted to listen to a recording of this on your Walkman, remember those were born 40 years ago. In any event, most of today’s technology would not work or be as effective because a crucial component, the cobalt-oxide cathode of the lithium battery only arrived 40 years ago.

So, if a time travel machine was invented, I am sure investors would be piling in like Black Friday shoppers. Another benefit would be that you could travel back in time and invest in some transformational products and offerings.

An investment strategy is a plan going forward, but it can be a strategy that looks back. If you don’t believe in looking back, try driving in today’s world without a rear-view mirror.