GROWTH THEMES | THEME 3 DIGITAL REALITY

1. EditGenetics

2. Connected Commerce

3. Digital Reality

4. Conservation Capitalism

5. The Future of Manufacturing

3

GROWTH THEME

Digital Reality

Exploring the Metaverse

In less than a decade we’ve moved from Google smart glasses to Oculus virtual reality headsets; what’s next?

At the endpoint of what we call the metaverse, everything you do in the physical world is done within a digital ecosystem. That’s where you get your education, where you work, where you spend your leisure time. Right now, we’re in an intermediate stage we call “digital reality”—where the virtual and physical worlds are becoming interconnected.

 

The technology is now where it needs to be to enable true digital engagement. Hardware and software are evolving and connecting. 5G is giving us fast speed, low latency, and significant bandwidth. And consumers, especially younger ones, are adopting digital reality technologies.

As we look for investment opportunities around digital reality, we’re focused on it as an enabling technology. Products that require interaction—like trying on clothes—are penetrated at levels half that of overall spending. But we should also start to see digital reality used in new areas, such as education or surgery, which could expand total addressable markets.

In less than a decade we’ve moved from Google smart glasses to Oculus virtual reality headsets; what’s next?

At the endpoint of what we call the metaverse, everything you do in the physical world is done within a digital ecosystem. That’s where you get your education, where you work, where you spend your leisure time. Right now, we’re in an intermediate stage we call “digital reality”—where the virtual and physical worlds are becoming interconnected.

The technology is now where it needs to be to enable true digital engagement. Hardware and software are evolving and connecting. 5G is giving us fast speed, low latency, and significant bandwidth. And consumers, especially younger ones, are adopting digital reality technologies.

As we look for investment opportunities around digital reality, we’re focused on it as an enabling technology. Products that require interaction—like trying on clothes—are penetrated at levels half that of overall spending. But we should also start to see digital reality used in new areas, such as education or surgery, which could expand total addressable markets.

Digital reality could be very disruptive to companies that don’t adopt the technology because somebody will move their cheese.

Bill Benton, CFA, Partner
Global Research Analyst

VIRTUAL AND PHYSICAL WORLDS INTERCONNECTED

Buy a dress and
keep it in your
virtual closet

Use augmented
reality to post selfies
with the dress—without ever putting it on

Your video game
avatar can wear
the dress

Pick up the dress from
a storage locker, wear
it to a live concert

Re-sell the dress on a
consumer-to-consumer
marketplace—without
physically touching it

Source: William Blair

Anticipation and Analysis—
Essential to Active Investing

As active growth investors, we seek to anticipate and analyze possible outcomes in a way other investment approaches cannot.

We are ultimately betting against the very powerful reality of mean reversion. The adage that “the more things change, the more they may stay the same” is powerful, and is often true.

But in reality, things do change. Consumer behaviors evolve. Humans innovate and create new solutions. Corporate profit pools shift. And new winners emerge. Just think about some of the things the world was predicting at the turn of the last decade.

And for now, the ability to predict changes is still the domain of humans. It is our job, then, to develop a practice of forecasting, which involves observing, learning, and anticipating the future.

Creating a framework for forecasting helps us decrease the variability around predicted outcomes, improve accuracy, and act on investment ideas earlier and with greater conviction.

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