We are all here in this plane of existence for the sole purpose of making decisions and then experiencing the consequences of those decisions. The object of the game is to make decisions that bear consequences we like and avoid making decisions where the consequences are not wanted. Scientists call this “Rational Choice”. Rational Choice plays out in our lives at all levels and at all times. It applies to market economies as well, serving as the engine of creative destruction as we all seek innovations and advancements in technology that can be used to make money by serving a need more efficiently. These advancements and innovations place the existing market of competing means and methods of servicing consumers at risk of becoming obsolete over time. This is technology risk and it applies to more than just technology companies – it applies to all companies.
If we consider the risk of total investment loss for what it is, we find that technology risk is directly related. As technology risk manifests in the market (in the form of new and/or additional sources of competition), asset obsolescence becomes more keenly experienced as revenues are made to suffer. As revenues start to coast downward, yield maintenance risk becomes more acute. As yield maintenance risk becomes more acute, the prospects for total investment loss become more significant.
The object of the 21st century commercial real estate investment industry is going to be technology risk management. We know we cannot avoid technology risk but we also know we can now manage technology risk for profit, instead of just being victimized by it.
There are no villains in this world and there are no victims – there are only volunteers.
What are you volunteering for today?