Season 4, Post 20: On the road, part 1

On the Road, Jack Kerouac’s defining 1957 novel, charts the progress of its protagonist from coast to coast across the US. While not literally following in his…

Season 4, Post 20: On the road, part 1

On the Road, Jack Kerouac’s defining 1957 novel, charts the progress of its protagonist from coast to coast across the US. While not literally following in his footsteps, your author is currently on the road, in America for the first time since March 2020. Having landed in Boston on Sunday, he will be visiting six states over nine days, crossing from East to West. The primary purpose for the trip is to meet companies across a variety of industries in order to understand how many of the key future trends which we follow are evolving. This week’s Blog covers the East Coast leg of our trip, while next week’s will focus on the remainder of America.

Days 1-4 saw your author pass through Connecticut, Maine, Massachusetts and New York. At a high level, the US is very much open for business. There were few requirements to wear masks in any city, and Manhattan was thronging with tourists from across the globe. One notable change, however, relative to your author’s last visit to the US is the increasing ubiquity of contactless as a form of payment. This was something confirmed to us when we met with Mastercard. Although the US lags some way behind other nations, about 1 in 2 in-person transactions using the Mastercard network globally now occur via contactless, a clear step change relative to pre-pandemic levels of 1 in 3.

Mastercard was just one of 11 businesses met over the past three days. Given the multi-thematic lens through which we view the world, our encounters brought us face-to-face with companies operating in industries as diverse as auto, data, healthcare, logistics, payments, synthetic biology and veterinary solutions. To the extent that there was common ground across this wide range of meetings, the following three take-aways stand out:

1: Transformation is real and happening. A combination of the pandemic, labour shortages and geopolitics has brought digital transformation front-and-centre of mind for not only every business we met, but also their underlying customers. There is a clear changed mentality where, wherever possible, tools that can aggregate data in order to drive accelerated automation and outsourcing (where relevant) will be deployed. The name of the game is not just increased efficiency and a more optimised cost base, but also increased resiliency, especially in the event of future unforeseen events. Just shy of a majority of executives with whom we spoke were of the opinion that an economic downturn was coming, although calling its timing was harder.

2: A more realistic assessment of the tools required. Absent thus far (and things may be different on the West Coast) was some of the hubris your author encountered on his previous trip to the US. Put another way, almost every business with whom we spoke was less keen to promote technology as an end in itself: none of artificial intelligence, blockchain or quantum is going to change the world overnight; rather, these technologies should be thought of as ‘enablers’ that are being slowly and gradually built into existing tech stacks in order to make them better. Businesses will increasingly deploy this toolkit of new technologies to improve and better differentiate their end products/ solutions, even if consumers may not always be aware of what has driven the change.

3: There’s a long runway ahead. It didn’t matter what business we met or which trend we discussed, there was a clear message from all executives – we are still (to use an Americanism) in an early innings. Even with a trend as well understood as the potential for digital payments to displace cash, we were given a clear explanation of why digital expenditure should continue growing comfortably at a c10% annual rate for the foreseeable future. Elsewhere, we heard that warehouses were “still living in the dark ages” when it came to automation; electric vehicles were “just at the beginning” of adoption and that the telemedicine opportunity was “pure white space.” At the same time, every healthcare/ medtech business expressed a message along the lines that “science does not stop” – new opportunities are continuing to emerge, almost daily. Watch this space.

19 May 2022​​​​​​​​​​​​​​​​​​​​​​​​​​​​

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Mastercard. The author of this piece has no direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.  

Alex Gunz, Fund Manager​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

Disclaimers

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital LLP believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital LLP, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital LLP is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital LLP disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital LLP's prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital LLP's prior written consent. 

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