Let's get the definition of a brave investor out of the way first, just so we're all on the same page. Brave investors see an opportunity and go for it, even when some risk is involved (which, of course, there always is). They are willing to step into new areas of investing when there's solid information indicating the investment will be worth the risk.
In short, many reading this are already brave investors.
For those of you who identify with that, then we need to talk about the Internet of Things, or IoT. You've likely heard the term bandied about a lot these days, but its importance (and the real investor opportunity) can often get lost in all the noise.
The Internet of Things is the connection of formerly unconnected "things" to the Internet so that they can collect and analyze data, and automate systems. Examples encompass connected homes, autonomous cars, appliances that reorder household goods, and industrial equipment that can predict when it needs to be serviced. The IoT is already well on its way, and it has the opportunity to transform industries.
Why you should care about the Internet of Things
First, some of the biggest tech companies in the world are already making massive investments in the IoT. IBM (NYSE:IBM) announced earlier this month that it would spend $3 billion on the Internet of Things over the next four years. Three billion! It's beefing up some cloud services, building out a new Internet of Things platform for apps, and it just partnered with The Weather Company (parent of The Weather Channel) to share and analyze weather data for companies.
Of course, IBM is a technology company so it's no surprise that it is willing to spend lots of money on new technology. But what if I told you that Amazon.com (NASDAQ:AMZN) will use the Internet of Things to automatically deliver household goods to your home, without you having to order a thing? That's no joke -- it's happening this year. Amazon has teamed up with appliance manufacturers to create an automated system, called the Dash Replenishment Service (DRS), that measures what you're running out of and reorders those goods -- all by itself -- through Amazon's website.
Imagine your coffee maker is running low on beans and it tells Amazon to order some more, and then they magically show up on your doorstep days later. That may seem a little frivolous now, but as Amazon's DRS expands to other appliances, your future home may be ordering much of your household goods without you doing a thing.
Then there's General Electric (NYSE:GE), the massive conglomerate that couldn't possibly have anything to do with a new tech trend, right? I think you know where this is going. GE has created its own IoT platform to analyze more than 10 million sensors used in its industrial equipment. The platform is called Predix, and it earned the company $1.4 billion just last year. Admittedly, that's just a drop in the bucket of GE's $148.6 billion in total 2014 revenue. But just two years from now, the IoT is expected to bring in $5 billion for GE. And that's just the beginning.
The Internet of Things is already influencing health care, industrial companies, automobiles, oil and gas, agriculture, aviation, and other industries. It is changing the way patients take their medication, and it will certainly change the way we all drive.
GE says the Internet of Things will add up to $15 trillion to global GDP by 2030, and Cisco Systems (NASDAQ:CSCO) says the cost savings and total revenue created by the IoT will reach $19 trillion over the next decade. If you still think the IoT is all hype, check out these additional IoT statistics.
But, yes, big opportunities often come with some risk. And this is where the brave part comes in.
Let's not sugarcoat it
First, it is difficult to project what the IoT will be worth 10 to 15 years from now, and that can lead to overly aggressive revenue predictions and cost savings estimates. For example, IDC predicts that the Internet of Things will be a $7.1 trillion business by 2020. That is less than half Cisco's estimate, but it's still a huge amount.
Second, there are plenty of legitimate reasons to be a bit hesitant about the Internet of Things. The Pew Research Center interviewed educators and tech experts about the IoT last year, and a handful of respondents feared the worst.
"The effects will be widespread but pernicious. We might as well inject ourselves into the Internet of Things. By 2025, we will have long ago given up our privacy," according to college professor Peter Jacoby.
Privacy and security are probably two of the biggest concerns with the IoT. HP says that nearly 70% of connected home devices are not sufficiently secure, which opens up users to serious privacy infringements. One recent example is of a hacker who tapped into a wireless baby monitor and started talking to the baby in its crib.
Of course, companies aren't immune to hacking, either. Malwarebytes Labs, which makes anti-malware products, said that this year, "Both mainstream media and the general public will hear about the first major hacker attack against an Internet connected device (that was previously not connected)." So far this hasn't happened on a large scale, but considering all the hacking in the recent past (think Heartbleed Bug and Target's data breach), it seems inevitable that IoT devices will be hackers' next target.
Even Cisco acknowledges the challenges. "It is also, unfortunately, too easy to imagine how these world-changing developments could go terribly wrong when attacked or corrupted by bad actors," the then-senior vice president of Cisco's security business, Christopher Young, wrote on the company's blog last year.
But let's not forget that any new technology poses new uncertainties that have to be addressed. Each of us allows a certain amount of risk in order to reap a technological benefit -- for example, the danger of identity theft through online banking. But the Internet of Things has much more potential upside than it does drawbacks.
And that's why brave investors should consider adding the IoT to their investments. No, everything won't go smoothly with the tech, but there are plenty of ways to invest in the Internet of Things no matter what your risk tolerance. The world's leading companies have already jumped into the IoT, and it's time for adventurous investors to do the same.