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Tech Boom Beginning or the End? 30 Oct 2013 War Room

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HiddenLevers War Room Open Q + A Macro Coaching Archived webinars CE Credit Idea Generation Presentation deck Product Updates Scenario Updates

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I.Technology = Disruption II.Technology Sector Activity III.Scenarios - Historical 1990s Tech Boom + Bust - Forward Looking War Room

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HiddenLevers TECHNOLOGY = DISRUPTION

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Disruption An innovation process where cheap, low-quality products ultimately displacing expensive, high-quality products. Disruption typically ruins the prospects of organizations caught on the losing side. Qualities of Disruptive technology 1.much cheaper + easier to use 2.improve at a rate much faster than the competition 3.performance satisfies most demanding uses 4.New technology dominates

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Disruption transforming all industries AUTOMATED Hotels + Travel Industrial + Manufacturing Professional Services Brick n Mortar Video Floor Trading Wired Telecom Printing Meter Reading 3d Printing Gene Sequencing Big Data Mobile Apps DESTROYED CREATED

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Moores Law, and its Long-Term Implications Moores Law: number of transistors on a chip doubles every 18 months Implications: Your phone is more powerful than a 70s supercomputer Computers are steadily acquiring human capabilities

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Does Tech Enable Job-Free Growth? Unemployment drops, but no one rejoins work force Productivity grows, but not employment

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Where are displaced workers going? % of workers on SS Disability doubled since 1980 Low wage jobs growing fastest

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Goodbye Middle Class. Hello Tech source: NELP, Alan Krueger via Huffington Postvia Huffington Post Left Lower wage jobs dominate the recovery, though higher wage jobs are holding their own Right The middle class is shrinking steadily, with job automation playing a key role

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income disparity will only worsen structural unemployment successful tech = disruption Tech = Disruption Recap automation = C U L8R middle class

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TECHNOLOGY SECTOR ACTIVITY HiddenLevers

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VC Market Overview Where and What? sources: PWC Moneytree, Steve BlankPWC MoneytreeSteve Blank VC deals still dominated by software, followed by biotech California dominates - 46% of all VC funding in 2013

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VC Market Overview How Much Money? sources: PWC Moneytree, Steve BlankPWC MoneytreeSteve Blank VC funding actually higher in 2011-2012 than today Could VC trends be front- running public markets?

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VC Market Overview Mark to Mystery source: Wall Street JournalWall Street Journal Twitter, Pinterest, and Snapchat command huge user bases challenge is monetization Snapchat specializes in disappearing content makes advertising more difficult All of the above rely on digital ads as business model can the advertising business sustain GOOG and all the rest?

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Winners - Four Horsemen Facebook and LinkedIn show strength of large social networks. Netflix threatens cable with original content & streaming. Tesla disrupts automotive and dealership models. YTD, over $80B has been added in market capitalization.

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Source: LA Times 8 March 2013 Winner - 3D Printing Hewlett-Packard announced 2014 entry into 3D printing. Key patents expiring February 2014 More growth? DDD and SSYS major players. VJET & XONE had 2013 IPO.

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Winner - Cloud Computing Here to stay long-term. 36% annual growth. $200B market Network security & NSA monitoring are concerns now. Players: Dropbox, Evernote, Drive, iCloud.

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Loser - Brick and Mortar Online shoppers killing big box stores Office Max Office Depot desperation merger Borders gone, Barnes & Noble shrinking. Source: USA Today Business Insider

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HiddenLevers TECH BOOM OR BUST SCENARIOS

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Tech Boom or Bust Historical Scenarios 90s Tech Boom 1995-99 Dot Com Bust 2000-02

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90s Tech Boom Fed hiked rates 6 times in 1999- 2000. Target rate 6.5% No rise in defensive equities (soap, food) S&P up 26% annually, for last 50 months of bubble source: HiddenLevers 550% 200% Four Horsemen high flyers, ushered in end of days +4000% +1200% +8000% +1400%

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Dot Com Bust Yahoo bought Geocities for 5b Priceline went from 1000 to 7 Brutal landing in Four Horseman Markets followed in 2001 source: HiddenLevers Nasdaq came back in line with S&P CSCO-88% MSFT-63% DELL -69% INTL-74%

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Scenario: Tech consumes the world

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serious tech dynamism being unleashed, not just dot coms Scenario: Tech consumes the world organizational overhauls involve digital innovation no spillover effect between tech + telecom angels succeeding now came from 90s IPO boom global dimensions, not just US private market runs most of the money flow source: MSN 2013: Reasons its different Defensive equities best start in 2 decades

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Scenario: Tech consumes the world Apple rebound Netflix rebound Priceline dominance in hotels Priceline first S&P 500 company at 1000/share Amazon Web Services source: Marketwatch, Moscow NewsMarketwatchMoscow News Hints of 1996 Autotrader.com 2001: 47m loss 2013: 62m profit paradigm shifts smartphones photos analytics Facebook rebound

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Scenario: Dot Com Dj Vu 2013 Nasdaq +20% 4HRSMN +230% Elon Musk says Tesla overvalued Facebook IPO. (enough said) Four Horsemen current Nasdaq outperformers, leading way to hell? 1 car on fire showed Tesla speculation FB Instagram purchase was done in 1 day source: HiddenLevers, NY Times, ValueWalk, CNN Money, SeekingAlphaNY TimesValueWalkCNN MoneySeekingAlpha

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major tech innovations end in speculative frenzies Scenario: Dot Com Dj Vu Doubts about economic returns of innovation Increasing size of early funding rounds Big companies buying their way into relevancy Lackluster due diligence source: Bungled IPOs leading to disappointment 2013: Reasons its the same

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Yahoo buying Tumblr for 1b, no rev for years Scenario: Dot Com Dj Vu Priceline double top at $1000/share Class actions against Zynga Color 43m in first funding round, now bust Corporate profits up 20%/year since 2009 S&P annual gains since March 09 match dot com era source: NY TimesNY Times Hints of 2000 Groupon hijinks turning down 6b Repositioning Firing founder Pinterest 1/3 valuation of Twitter with no revenue Square versus MasterCard Solyndra = Fraud tainting green tech altogether

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Tech Boom or Bust Future Scenarios Jurys Out Tech Consumes the World Bad Dot Com Dj Vu

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Support for SMA + managed products Scenario Modeling to Reports improved workflow War Room updated interface Performance + Speed improvements Coming soon: Notifications + Alerts New Levers - Technology Product Update