[This column was updated 3/27/02 to add a resource and new information about the company Nanovation.]
I've wanted for a long time to learn more about nanotechnology, because participants in Rule Breaker seminars (we now have a self-paced online version) have for years believed it's the fuel for important, emerging industries. Today's column showcases the Fool community, where there are people only too glad to help us learn about an amazing variety of stuff. Nanotechnology just happens to be one of them.
To start my nano education, I took a tour of the nanotechnology discussion board. It contains the opposite of nanotech in information -- gonzotech? Mondotech?
What is nanotech?
Community member howardroark led off the board's discussion two years ago. He chose the words from Nobel Prize-winning physicist Richard Feynmann as a definition -- "maneuvering things atom by atom" -- and others from Arthur C. Clarke to capture his own awe of the possibilities: "Any sufficiently advanced technology is indistinguishable from magic." In short, howardroark thinks nanotechnology is fun, and the more -I read, the more I agree. From the start, though, I appreciated many warnings that nanotechnology had received the kind of hype reserved for the Internet and biotechnology before it. Investors must apply their most critical instincts to the science and technology magazines, for example, which strive to entertain as well as educate (sound familiar?).
Most agree that Eric Drexler's 1986 Engines of Creation brought the technology out of academia to a wider audience. The book is available for free online from the Foresight Institute, an entity instrumental in promoting nanotechnology research. I haven't yet read the book, in which Drexler shows nanotech without the math, but GregTrocchia says that his next book, Nanosystems -- his doctoral thesis in book form -- screams "You want rigor? I'll give you rigor!"
Lokicious strongly recommends Small Times as a source for nanotech information. Other great resources are the Nanotechnology online magazine, a Nanotechnology Database funded by the National Science Foundation and maintained by Loyola College in Maryland, and NanotechNews.com. Another great way to keep up week by week through the discussion board is with jat4's nanotechnology information database, which he regularly updates after combing the Web.
The biotech vision of nanotech occurs to many people first -- what could be smaller than DNA? Remember Fantastic Voyage? In this 1966 film, whose screenplay became Isaac Asimov's novel of the same name, Raquel Welch and company shrink and travel in a molecular space ship to dissolve a blood clot and save a defecting Russian scientist who has top secret information. To learn about this field, discussion board members laud Nanomedicine, Vol. 1, Basic Capabilities, by Robert A. Freitas, Jr., which shows nanotechnology's applications to healthcare, and it too is free on the Web. Greg gives Nanomedicine a rave. The University of Michigan Center of Biologic Nanotechnology maintains a great website with more information.
Much nanotech research concerns carbon nanotubes, "fibers 100 times stronger than steel at only one-sixth the weight," according to Nobelist Richard Smalley, former director of the Center for Nanoscale Science and Technology at Rice University. Smalley and others see enormous potential for nanotubes to store hydrogen fuel. Other major research concerns molecular computing and new nanotube nonvolatile addressable computer memory.
In 2000, the Clinton administration was so excited about nanotechnology's potential in semiconductors and biotechnology, for starters, that it secured $495 million in federal funding for research, after Smalley and Ralph Merkle testified in support of it before Congress.
Companies to watch
A company to watch is privately held Zyvex in Richardson, Texas, founded in 1997 by CEO Jim Von Ehr. Von Ehr, made wealthy when he sold his Altys software company to Macromedia (Nasdaq: MACR), has dunked huge sums of his own money into the company and has assembled the greats of nanotech. Nanomedicine author Freitas joined Zyvex as a Research Scientist in 2000. Ralph Merkle, another nanotech pioneer formerly at Xerox's Palo Alto Research Laboratories, signed up as a Principal Fellow in 1999. Ray Kurzweil, author of The Age of Spiritual Machines, serves on the board. Zyvex's website provides an excellent overview of the field in an article called "Molecular Nanotechnology."
GregTrocchia identifies Zyvex as the only pure play in assemblers: "Assemblers will be capable of manipulating any quantity of materials, down to the level of individual molecules and even atoms, with such precision that where they go can be controlled within a fraction of an atomic diameter. This would allow one to create devices, specified to atomic precision (if desired), of arbitrary complexity including other assemblers. The combination of this degree of control and precision plus the ability to scale and churn out huge quantities of product that self-replicating systems provide, Drexler referred to as Nanotechnology, since atoms are most conveniently measured on the nanometer scale." Responding to some concerns about self-replicating robots, Von Ehr promises that the company follows Foresight Institute guidelines for nanotech not to develop "wild, self-reproducing technology."
Zyvex does work in MEMS (micro electro mechanical systems), which are "micromachines, made using the same, small but still bulk, photolithography technology commonly used to etch microprocessor chips," and Merkle is the authority there. In part of a rip-snorting Upside Today profile in Aug. 2000, Merkle told potential Zyvex investors that MEMS promised "a billion Pentium equivalents in something the size of a sugar cube; materials for manufacturing and construction will have a weight-to-strength ratio 50 times greater than today's; aerospace, planes and rockets will all benefit." One of the company's very, very ambitious goals is to be a kind of Applied Materials (Nasdaq: AMAT) -- the semiconductor equipment company -- to nanotech companies. Zyvex explains that a key factor will be developing the software to enable computer control of interface to their microscopic world.
The giants aren't sleeping
Large companies such as IBM (NYSE: IBM), Lucent Technologies (NYSE: LU), Agilent Technologies (NYSE: A), and Hewlett-Packard (NYSE: HWP) have substantial nanotech research and development operations, with IBM and Hewlett-Packard toiling mostly in computer applications.
A mix of other large and small companies apply MEMS technology to fiber optic networking equipment. This includes JDS Uniphase (Nasdaq: JDSU), Lucent, Alcatel (NYSE: ALA), Corning (NYSE: GLW), and Nortel subsidiary Qtera. Lokicious generously shares his gripping tale of now-defunct Nanovation, a former player in this place.
Other smaller operations to watch are QuantumDot, Piezomax, and Carbon Nanotechnologies, Inc. (check out this interview with President and CEO Bob Gower), Nanophase Technologies (Nasdaq: NANX), and Altair Technologies (Nasdaq: ALTI). Caesium and jat4 maintain a model portfolio of companies to follow on the nanotechnology discussion board.
As we learned with the Internet and biotechnology, nanotechnology is a technology, not an industry. Rule Breaker companies will be those leading the charge with nanotechnology to revolution existing industries or create new ones, though I'll probably be one of those who call them "nanotechs" for short. If Zyvex could be the Applied Materials of nanotech, that holds enormous potential, but I imagine that as Rule Breaker investors we would be looking for at least the potential for consumer products. And of course neither Zyvex nor many of the other companies are even public yet, let alone assured of operating funds beyond Von Ehr to survive until any IPO. We have plenty of time to learn more.
That's the tour, and I hope you enjoyed it. Updated overall portfolio returns follow the disclosure below (and please take this poll on options for displaying individual short positions in the tables at the bottom). With that, I'll say "Nano-nano," or perhaps "No, No, Nano," or better, Fool on!
Tom Jacobs (TMF Tom9) just got a great deal on a laptop and will bore anyone with the details. At press time, he owned shares of JDS Uniphase. To see his stock holdings, view his profile, tidily arranged according to the The Motley Fool's aesthetics -- er, disclosure policy.
Rule Breaker Portfolio as of 3/25/02 Market Close:
RB Port S&P 500 Nasdaq Week -4.95% -2.90% -3.44% Month -4.79% 2.26% 4.68% Year* -9.76% -1.43% -7.07% Total Return** since 8/4/94 375% 147% 152% CAGR*** since 8/4/94 27.90% 12.56% 12.84% *We plan to add $25,000 in April: $12,500 for the quarter and $12,500
that we didn't deposit in Jan.
**For the Portfolio, this = (Current Value - All Cash Deposited)/All Cash Deposited.
Because we add $12,500 quarterly, this isn't as meaningful as (see next item).
***Compound Annual Growth Rate using Internal Rate of Return. This performance
measure accounts for the periodic deposits.