Yesterday, Matt showed you what can happen when you take a proven system for identifying successful startups…
And combine it with a major technology trend:
You get the opportunity to earn life-changing profits! (Like when early investors in Uber earned 10,000 times their money.)
But Matt raised a very important question:
How do you spot these trends in the first place, and how do you know when to invest in them?
The answer lies in one simple chart…
“Stanford Profit Chart”
Take a look at this chart…
It’s known as the “Technology Adoption Life Cycle.”
It was pioneered by a Stanford graduate and Ph.D. named Geoffrey Moore.
This chart has been put into practice at many of the world’s leading technology and venture capital firms.
That’s because it holds the key to get in on massive technology trends — at just the right time.
Neither Too Early… Nor Too Late
You see, if you bet on an emerging technology too early, you can lose a fortune.
For instance, when the Blu-ray and HD-DVD movie formats were competing for the future of the living room, various companies lined up to support one or the other.
For example, Sony bet on Blu-ray. But Toshiba backed HD-DVD.
In the end, Blu-ray won. And Toshiba lost more than $1 billion.
Moore’s chart can help you avoid bad bets like Toshiba’s:
It can help you spot a technology or trend before it takes off… but not so early that you’ll be putting your money at risk.
Let me explain how it works.
Five Steps to “Breakthrough”
Moore’s chart shows that tech breakthroughs develop in five phases.
Phase 1 — In the first phase, a new technology is primarily used by innovators. This group tends to work in tech, or they’re tech enthusiasts.
Phase 2 — Then come the early-adopters. These folks might not work in tech, but they love getting their hands on new devices and gadgets before others.
Phase 3 — Then come the early majority. For investors, this phase is crucial. This is when a technology starts to go “mainstream,” like Blu-ray did after it won the war against HD-DVD.
Phases 4 and 5 — And lastly, you have the late majority and the laggards. The folks in these groups tend to be intimidated by new technology, or skeptical of its utility.
For example, think about someone in your family who waited a decade before swapping out their VHS player for a DVD player… or the one who still doesn’t have a smart phone.
But for our purposes, one part of this chart is more important than all the others…
“Crossing the Chasm”
I’m referring to the gap between the early adopters… and the early majority.
That gap is what Moore calls “the chasm”:
You see, when a new technology makes the leap from early adopters to the early majority, that’s called “crossing the chasm.”
If a technology can reach this point, you know it’s about to catch on with almost everyone — and that is precisely when you want to invest in it:
You’re still way ahead of the curve. But almost all the risk has been removed.
To show you what I mean, let’s see how you could have spotted (and taken advantage of) one of the biggest trends Matt shared with you yesterday.
When E-Commerce “Crossed the Chasm”
In 1996, most people still didn’t know what the Internet was, let alone how to buy something online.
But that’s the year Walmart launched an online store.
This was a pivotal moment. You see, e-commerce had existed for years, but it hadn’t gone mainstream yet.
Walmart’s online store was the e-commerce industry’s “crossing the chasm” moment:
All of a sudden, hundreds of millions of customers were introduced to buying things online.
But Walmart didn’t end up the winner in e-commerce. Not even close.
That title goes to Amazon.com (AMZN), which now brings in close to $300 billion per year.
And that’s why Amazon’s earliest investors pocketed nearly 210,000x their money…
That’s enough to turn $500 into a fortune worth over $100 million.
The Biggest Question
And this brings us to perhaps the biggest question of all:
After using Moore’s approach to help you identify a trend just as it crosses the chasm…
How do you know which company to invest in?
For example, how would you have known to invest in Amazon, not Walmart?
Well, as Matt will explain next week, we have a proven system for doing just that…
So stay tuned!