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The Cybersecurity Boom

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The Cybersecurity Boom

How Investors Can Play the Global Explosion in Cyberattacks and Cybercrime

Thanks to Purefunds Cybersecurity ETF (HACK) for helping us put this together.

In 1983’s WarGames, a young Matthew Broderick unwittingly hacks into military central computer while searching for video games and almost inadvertently starts World War III. This film is classified on IMDB as in the “Sci-fi, Thriller” genres.

While the prospects of cybercrime and cyberterrorism are certainly thrilling (and scary), the descriptor of “Sci-fi” for the movie may no longer be necessary. In the last calendar year, there’s been dozens of high-profile cybersecurity incidents that are not a far cry from the geopolitical near-miss in WarGames.

The United States government and the country’s largest bank have both had serious security intrusions as of recent. This summer the United States Government revealed it had over 20 million records stolen by hackers allegedly based in China. Just as concerning, it was exactly one year ago that J.P. Morgan was compromised with records stolen from over 76 million households and 7 million small businesses. The company has now vowed to spend $250 million a year in preventing such incidents.

Most recent of all is this week’s hack of the popular adultery site Ashley Madison. The leak of sensitive information on potentially 37 million customers isn’t a potential geopolitical concern as the above cases, but it does have business implications: the website’s plan to raise $200 million in an IPO in London has now been kiboshed for the foreseeable future.

If big organizations like Sony, Target, Google, and Home Depot can’t do anything to stop cybersecurity incidents, what chance do the rest of us have?

And that’s the problem with cyberattacks. Detected incidents have skyrocketed over the last five years, soaring from 3.4 million to 42.8 million from 2009-2014, and they now cost the global economy an estimated $400 billion a year. Every day these incidents happen on a small scale, but today’s hacking technology and sophistication allows for much more. Exploitation of big cybersecurity vulnerabilities could cause financial chaos, destroy reputations of entire companies, expose business and state secrets, and even shut down moving vehicles remotely. This is not science fiction. This is reality – and we haven’t even gotten into the hypothetical potential damage that hackers could cause if they had even more resources or resolve. People’s lives and money are at stake.

Systems are more sensitive and hyperconnected than ever before, and hackers are deploying more sophisticated tactics to take advantage of them for personal or organizational gain. Luckily, there is also an entire industry of engineers, programmers, analysts, designers, cryptographers, and other professionals trying to build the walls and moat around the castle. Cybersecurity, as we depict in this infographic, is a booming industry with hundreds of companies scrambling to protect us from having intellectual property, health records, financial information, and other vital data compromised.

That’s why by 2020, the cybersecurity market is expected to be valued at $170.2 billion, which implies a 9.8% CAGR (compound annual growth rate) from today’s estimate of $106.3 billion. Businesses and governments are spending more on cybersecurity: even the Whitehouse announced this year that in its 2016 fiscal budget that it would aim to spend $14 billion on additional measures. Fifteen years ago, cybersecurity was only a blip on the US government’s radar at $938 million in spending.

The private sector is in the same boat, as 69% of business executives see cyberattacks as a threat to their growth. This is a fair statement since Verizon estimates in its 2015 Data Breach Investigations Report that the average cost of a cyberattack to a business ranges between $475,000 to $9 million depending on the number of records stolen.

Among the companies that are benefiting from the surge in cybersecurity spending include those building firewalls, secure servers, routers, anti-virus software, and malware detection tools. Firms that specialize in consulting and solving related security problems are also getting plenty of interest. Investors can potentially profit from this sector as well by identifying companies and funds that will gain from booming activity and spending in the sector.

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Animation: How Tech is Eating the Brand World

Changing consumer expectations have created a harsh environment for traditional brands to operate in—will tech companies make them obsolete?

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How Technology is Eating the Brand World

Building a brand with an imperishable competitive edge can be difficult.

Technology companies however, are redefining what that edge means. By hastily responding to emerging consumer needs and leveraging the power of brand, these companies can continuously create meaningful solutions for real problems with scale.

Today’s animated chart highlights the most valuable brands in 2019 versus 2001, according to the annual “Best Global Brands” ranking by Interbrand. It illustrates the degree to which technology companies have been able to scale into massive brands over a short time frame, supplanting some of the best known companies in the world.

What is Brand Value, and How is it Measured?

Interbrand has created and consistently used a robust formula to measure brand value. Brand value is the Net Present Value (NPV) or the present value of the earnings that a brand is forecasted to generate in the future.

The formula evaluates brands based on their financial forecast, brand role, and brand strength. The full methodology can be found here.

Tech Reigns Supreme

In 2001, the cumulative brand value was $988 billion. Today, that value stands at $2.1 trillion and represents an average CAGR of 4.4%. Over the years, global tech giants have swiftly climbed the ranks, and now represent a significant amount of the total brand value.

In fact, with a combined brand value of almost $700 billion, tech companies account for half of the top 10 most valuable brands in the world. Perhaps unsurprisingly, Apple holds the title for the world’s most valuable brand in 2019—for the seventh year running.

Only 31 brands from the 2001 ranking remain on the Best Global Brands list today, including Disney, Nike, and Gucci. Coca-Cola and Microsoft are the few who have remained in the top 10.

Below is the full list of the world’s most valuable brands:

RankBrandBrand Value ($B)1-Yr Value ChangeIndustry
#1Apple$234B9%Technology
#2Google$168B8%Technology
#3Amazon$125B24%Technology
#4Microsoft$108B17%Technology
#5Coca-Cola$63B-4%Beverages
#6Samsung$61B2%Technology
#7Toyota$56B5%Automotive
#8Mercedes Benz$51B4%Automotive
#9McDonald’s$45B4%Restaurants
#10Disney$44B11%Entertainment
#11BMW$41B1%Automotive
#12IBM$40B-6%Business Services
#13Intel40B-7%Technology
#14Facebook$40B-12%Technology
#15Cisco$35B3%Business Services
#16Nike$32B7%Retail
#17Louis Vuitton$32B14%Retail
#18Oracle$26B1%Business Services
#19General Electric$25B22%Diversified
#20SAP$25B10%Business Services
#21Honda$24B3%Automotive
#22Chanel$22B11%Retail
#23American Express$22B13%Technology
#24Pepsi$20B-1%Beverages
#25J.P Morgan$19B8%Finance
#26Ikea$18B5%Retail
#27UPS$18B7%Logistics
#28Hermes$18B9%Retail
#29Zara$17B-3%Retail
#30H&M$16B-3%Retail
#31Accenture$16B14%Business Services
#32Budweiser$16B3%Alcohol
#33Gucci$16B23%Retail
#34Pampers$16B-5%FMCG
#35Ford$14B2%Automotive
#36Hyundai$14B5%Automotive
#37Gillette$14B-18%FMCG
#38Nescafe$14B4%Beverages
#39Adobe$13B20%Technology
#40Volkswagen$13B6%Automotive
#41Citi$13B10%Financial Services
#42Audi$13B4%Automotive
#43Allianz$12B12%Insurance
#44ebay$12B-8%
#45Adidas$12B11%Fashion
#46Axa$12B6%Insurance
#47HSBC$12B5%Finance
#48Starbucks$12B23%Restaurants
#49Philips$12B-4%Electronics
#50Porsche$12B9%Automotive
#51L’oreal$11B4%FMCG
#52Nissan$11B-6%Automotive
#53Goldman Sachs$11B-4%Finance
#54Hewlett Packard$11B4%Technology
#55Visa$11B19%Technology
#56Sony$10B13%Technology
#57Kelloggs$10B-2%FMCG
#58Siemens$10B1%Technology
#59Danone$10B4%FMCG
#60Nestle$9B7%Beverages
#61Canon$9B-9%Technology
#62Mastercard$9B25%Technology
#63Dell Technologies$9BNewTechnology
#643M$9B-1%Technology
#65Netflix$9B10%Entertainment
#66Colgate$9B2%FMCG
#67Santander$8B13%Finance
#68Cartier$8B7%Luxury
#69Morgan Stanley$8B-7%Finance
#70Salesforce$8B24%Technology
#71Hewlett Packard Enterprise$8B-3%Technology
#72PayPal$8B15%Technology
#73FedEx$7B2%Logistics
#74Huawei$7B-9%Technology
#75Lego$7B5%FMCG
#76Caterpillar$7B19%Diversified
#77Ferrari$6B12%Automotive
#78Kia$6B-7%Automotive
#79Corona$6B15%Alcohol
#80Jack Daniels$6B13%Alcohol
#81Panasonic$6B-2%Technology
#82Dior$6B16%Fashion
#83DHL$6B2%Logistics
#84John Deere$6B9%Diversified
#85Land Rover$6B-6%Automotive
#86Johnson & Johnson$6B-8%Retail
#87Uber$6BNewTechnology
#88Heineken$5,6264%Alcohol
#89Nintendo$6B18%Entertainment
#90MINI$5B5%Automotive
#91Discovery$5B-4%Entertainment
#92Spotify$5B7%Technology
#93KFC$5B1%Restaurants
#94Tiffany & Co$5B-5%Fashion
#95Hennessy$5B12%Alcohol
#96Burberry$5B4%Fashion
#97Shell$5B-3%Energy
#98LinkedIn$5BNewTechnology
#99Harley Davidson$5B-7%Automotive
#100Prada$5B-1%Fashion

Since 2001—the first year the report featured 100 brands—several tech companies have joined and climbed their way to the top of the list, while 137 notable brands dropped off entirely, including Nokia and MTV.

In an interesting turn of events, Facebook dropped out of the top 10, and into 14th place after a volatile year. The move however, is not surprising. The tech giant has been mired in controversies, ranging from data privacy issues to prioritizing political influence.

Which Brands Are Growing the Fastest?

2019’s fastest growing brands also signals tech domination, with Mastercard, Salesforce and Amazon leading the charge.

The companies in this ranking experienced a significant increase in their brand value year-over-year (YoY).

RankBrandBrand Value ($B)YoY Growth
#1Mastercard$9B25%
#2Salesforce$8B24%
#3Amazon$125B24%
#4Gucci$16B23%
#5Starbucks$12B23%
#6Adobe$13B20%
#7Visa$11B19%
#8Caterpillar$7B19%
#9Nintendo$5B18%
#10Microsoft$109B17%

According to Interbrand, the success of these brands may be attributed to their ability to anticipate rapidly changing customer expectations.

While the relationship between business performance and brand equity has been a widely debated topic for decades, it is clear that customer satisfaction bolsters brand equity, and encourages impressive financial results.

Disrupt, or Be Disrupted

Beyond anticipating changing needs, some of the most successful brands also cater to a younger customer base. This is the most evident in luxury and retail—the two fastest growing sectors for the second consecutive year.

This audience is tech-first in their buying habits and increasingly demand more elevated and shareable experiences. As a result, traditional brands across all sectors are innovating to keep up with this audience, and some are essentially becoming tech companies in the process.

For example, Gucci attributes their success to finding the perfect blend between creativity and technology. The company that once relied on its heritage, now focuses heavily on ecommerce and social media to engage with their Gen Z customers.

Similarly, Walmart recently announced that they are employing virtual reality headsets and machine-learning-powered robots in an attempt to compete with Amazon.

Will traditional companies ultimately become tech companies, or simply get eaten alive?

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A Visual Timeline of AI Predictions in Sci-Fi

AI is shaping the global economy in unprecedented ways, and transforming life as we know it—but science fiction has predicted this all along.

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They say you shouldn’t believe everything you see on the big screen.

However, in the case of science fiction, the human imagination has gotten a few things right—especially when it comes to futuristic forecasts. Today, the artificial intelligence (AI) revolution is transforming everything, but it turns out we had a hunch about it all along.

When AI Comes to Life

Today’s infographic from Noodle.ai takes a look at how some movie and television predictions for AI’s capabilities have taken hold in the real world.

AI Predictions in Science Fiction

Many early “predictions” about future technologies certainly missed the mark—but it seems science fiction was able to accurately forecast a thing or two about AI.

AI Basics: Making Life Better

Artificial intelligence is all about equipping machines with the ability to mimic human decision-making processes. It has a wide range of applications, from basic automation to advanced machine learning models.

AI has proliferated into virtually every aspect of life, and in the graphic, it’s clear that several sci-fi-turned-real inventions are aimed at making things more convenient for us humans.

Sci Fi PredictionAI in Reality
1962: The Jetsons cartoon shows video calls on a tv screen, and a robot maid.2002: iRobot Roomba is the first robotic vacuum.
2018: Facebook Portal is a video-calling smart display.
2019: Moley robotic kitchen is able to prep meals from scratch and clean up afterwards.
1966: Star Trek inspired several tech innovations that have become commonplace.Examples include: Bluetooth headsets, voice assistants, cellphones, and automatic sliding doors.
1989: Back to the Future features smart glasses for television and phone calls, and a smart watch which can precisely predict weather.2012: The Dark Sky app provides custom alerts on the weather to the minute.
2013: Google Glass is able to make calls, send texts, display photos, and provide directions.
2015: Apple Watch comes enabled with WiFi, Bluetooth, a GPS, and even a heart sensor.
1999: Smart House showcases a fully automated house that is able to respond to verbal requests, cook and clean, and control thermostat settings.2019: A HGTV contest lets people win a WiFi connected smart house, complete with voice-enabled thermostat and security systems.

Of course, these have had varying degrees of success. While Google Glass didn’t initially resonate with the wider public, the augmented reality smart glasses have now proved useful in businesses such as manufacturing.

Elsewhere, sci-fi-inspired advances in industries like healthtech are providing a new lease of life for many patients—and continuously reinventing the frontier of what we think is possible.

Sci-Fi Helps Us Push Boundaries

One monumental event in AI history occurred in 1997, when IBM’s Deep Blue beat a chess master at his own game. This event shook the world when we realized what AI could truly be capable of—even though sci-fi had in fact anticipated it 20 years prior.

But as the graphic shows, not all is rosy in science fiction’s likeness of AI. It’s often depicted as something to fear, and certain predictions have proved to be eerily accurate.

Sci Fi PredictionAI in Reality
1977: K9, a robotic dog in Doctor Who, beats its master at a chess game.1997: IBM’s Deep Blue computer beats a Russian chess master, Garry Kasparov.
1984: Skynet from Terminator, a self-aware AI program, attempts to extinguish humanity.2019: The U.S. Army creates an autonomous system to “acquire, identify, and target threats” (ATLAS AI).
2011: AI monitors surveillance cameras and predicts future criminals in Person of Interest.2018: The National Data Analytics Solution (NDAS)

While not all of these are causes for alarm, they clearly demonstrate that sci-fi has the capacity to influence the breakthrough technology we could end up seeing a few years down the line. However, turning reel to real can raise some curious dilemmas.

Rights for Robots?

Last year, the European Parliament debated an interesting question: do robots qualify as people?

The resolution considered granting “personhood” to sophisticated, autonomous robots. However, over 150 AI experts strongly warned against this proposal, arguing it would “blur the relation between man and machine” in a way that is too unethical.

Nevertheless, this thought experiment proves that artificial intelligence is matching our wildest imagined predictions for it.

AI is whatever hasn’t been done yet.

—Tesler’s Theorem

As we move ever closer towards a world where AI is inextricably linked with the everyday, how else could science fiction shape our expectations of the future?

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