I recently watched an interesting video on YouTube about the disruption of energy and how it is going to change the way we travel. BLUF (bottom line up front): expect to see all electric, automated vehicles by 2030, which will completely transform the energy and transportation sector. See Electric Vehicles.
Although it made me think about the future of our economy quite a bit, it also made me think about how I purchase and consume products, refer back to 20-Year-Old Backpack, and how that impacts the way I invest. What astonished me was how fast the price of newly adopted technology changes, and for all of those Innovators and Early Adopters, how that can have a large impact on someone’s bottom line. Take Tony Seba’s example in the video about sensors; in 7 years (2007-2014) the cost has gone down by 1,000x. That’s pretty crazy! On more of a personal consumer level, take the iPad; you can probably find an iPad 1 for free on Craigslist right now (Yes, I have one and use it all the time).
So, call me cheap, frugal, the late majority, or even a laggard (iPad 1), sure, but let’s look at how that relates to economics and investing.
As I learned in my economics class: low supply + high demand = high price.
The newest trend is the Electric Vehicle. Tesla has made an awesome machine and their product currently sits on the far-left side of the chart. They are becoming very popular, and there aren’t many of them; therefore, making them very expensive. Per Tony Seba, that is going to change very quickly though. All of the other major transportation companies are well on their way to making similar designs with similar technology. So, unless you just have endless amounts of money right now, why would you buy a Tesla when in a couple years they will be substantially cheaper? Suckers!
Now, I was in the market for a new vehicle just recently, as my family is moving back to the United States from Italy, and we will need a vehicle. Unconsciously, and without seeing this video prior to making my purchase decision, I did the opposite of what most Early Adopters are currently doing: I bought a really old, really beat up Land Rover Defender from the United Kingdom (yes, the steering wheel is on the right side). Why? I wanted to find something on that far left-side of the chart, but I wanted to buy it at a low price. I know that most of the newer vehicles lose value as soon as you drive it off the lot, so I decided I would try to find a vehicle that would be an asset, not a liability. I looked at the purchase price of the Defender, how much it would cost for me to rehab it, and how much I could sell it for in the United States. To me, it was a no-brainer; similar to crunching numbers on a house-flip.
Isn’t this the awesomest thing you’ve ever seen? Yes, I said awesomest.
So, what’s the point?
I really like Mark Twain’s quote above and I think it has a real impact on how I consume and invest. Many try to invest in the stock market by picking the newest, latest and greatest stock, technology, or product, speculating that it will go up in value. Many buy into the coolest new “thing” and buy when it is most expensive. But I have started doing the opposite; I have a 20-Year-Old backpack, an iPad 1, an awesome right-hand-drive diesel-guzzling truck, and invest in real estate (the oldest and safest asset class since the beginning of time).
What do you think? Do you have a different perspective? I’d love to see your ideas on the subject.
Written by Stuart Grazier
Right on Stu!! Great post. Very thought provoking.
That Defender looks bad a$$!
I guess the only thing I would think about is the additional costs associated with a vehicle like that. Gas, maintenance, insurance, etc. may drive up the cost of owning it. Although the electric vehicle is initially expensive to buy, there is no gas bill, maintenance is cheap, and I’m guessing insurance is cheap too.
Cheers,
Colin
Stu,
I’m sorry to tell you this brother, but you are on the side of the majority (for a site that supports real estate investors). ?. Sorry, I couldn’t resist the rib.
But what we have to assume, if we agree that “early adopters are suckers,” is that the premium they pay for being early adopters isn’t worth the price. And conversely, that the cost savings of the mid/late adopter is re higher good. To early adopters, by definition being early is worth the price. They pay for what we all pay for, the expectation that our purchase will lead to the experiencing of a certain emotion. This is a basic human need we all have for significance. What we do/why we buy to try to achieve that so significance is driven by personality type. My business is built on these principles.
If you’re interested, I can send you a link to my “Home Buyer Personality” Quiz. It’s what I use for lead generation, and helps me segment my customers. A. I would love your feedback, B. With a little tweeking it could do the same for any business i.e. the folks on MOREIC.
Thanks brother,
Chuck
Thanks for the post Chuck, and appreciate your candidness. I agree with your comment that I am a little late to the stage for real estate investor websites, but I was looking for something that directly connects and educates military service members about investing and I couldn’t find it. I’ve had so many instances where other service members ask me what I do, how I’ve gotten to where I am today, and how to get started, so I figured there was a niche market for it. Additionally, I only wish I would have started earlier, as I see an opportunity to really help/change the lives of many new/young service members by teaching them about real estate investing early on in their military career.
I’m always interested in other people’s business systems and would be happy to take a look at your lead generation. Fire away.
Cheers,
Stu
Sorry to give you the wrong impression Stu. I love what you’re doing and think it is an invaluable niche. My comment was meant to address the view point of Investors rather than address your site, which I’m a huge fan of and refer folks to often.
Being an investor, on a investor-focused website, would place you in the majority perspective of…me paraphrasing here, ‘future value is more important than experience value.’
Hence early adopters place value on and pay a premium for the experience, and it’s a good thing they do as someone needs to buy those beautiful flipped houses guys on this site renovate. (Not me, I’m a buy and hold forever type guy).
Hope that clarifies brother.
Oh and the quiz is on my website… http://www.realestaterising.com, only takes 5 min and is hopefully fun. Would love to hear what you think, and how I could tweek it to make it valuable for you and other investors. Currently it is geared to first time home buyers, but could easily be adapted to identify good flip investors, or flip purchasers or great renters.
No worries Chuck. Many thanks for the support. I’ll give your quiz a shot.