Warren Buffett's Worst Nightmare

By Wayne Mulligan, on Thursday, July 2, 2015

Imagine you’re out for a leisurely drive.

It’s a late Sunday afternoon towards the end of the summer. The sun is shining, the windows are down, and your favorite song is playing on the radio.

But as you go to hit your turn signal, something strange happens:

Your left arm starts going numb.A cold sweat breaks out on the back of your neck—and suddenly it feels like an 18-wheeler just landed on your chest.You quickly realize what’s happening: you’re having a heart attack.

Panic sets in. You can barely breathe, and there’s nowhere to pull the car over.

Your vision blurs—then everything goes dark.

The next thing you know, you’re waking up in a clean white room surrounded by your loved ones.

For a second, you think you might have died. But then you realize you’re in a hospital bed, and you’re actually feeling ok. What happened?

As you’ll learn in a moment, you survived because of a breakthrough technology.

This technology that could make investors a fortune...

And it could put Warren Buffett in the poor house.

The Key to Buffett’s Fortune

Before we dive into this life-saving technology, first you should understand why Buffett realizes—and acknowledges—that it’s such a threat.

It relates to the well-known “secret” of how his company, Berkshire Hathaway, makes so much money.

You see, if you look at Berkshire Hathaway’s annual reports, you’ll notice two important things:

  1. Nearly one-third of its profit comes from its insurance subsidiaries—companies like GEICO
  2. These insurance businesses provide Buffett with something called “float.”

“Float” is the money that insurance companies keep on hand after customers pay their premiums. They use it to pay for future claims.

For Buffett, this float is his lifeblood. Why?

Because he can take that money and invest it.

And given his market-crushing investment record, it’s clear that he’s been able to put this float to very good use.

And that is why Buffett’s worried about this new technology:

It could cause this float—his lifeblood—to disappear.

Life-Saving Innovation—From an Unlikely Place

You might be wondering what sort of technological breakthrough could save your life and threaten Buffett’s insurance empire.

You might think that it has something to do with a new “miracle drug.”

But the answer doesn’t reside in some laboratory—

It resides in your pocket… or around your wrist… or in your car.

Let me explain:

For the past 20 years, the main function of the Internet was to enable humans to communicate with one another.

But for the next 20 years, the Internet will be about enabling devices to communicate with each another.

This trend is known as “The Internet of Things,” or “IoT” for short. And it could have a dramatic impact on our lives—and on Buffett’s fortune...

Self-Driving Cars

A prime example of IoT is the self-driving car.

Self-driving cars have built-in sensors, cameras and GPS devices. They can navigate city streets and highways without any human intervention.

Google’s been testing them since 2009. In fact, these cars have already clocked more than 1.8 million miles.

Shockingly, they’ve only been involved in 6 fender benders—all of which were due to mistakes made by other drivers.

You see, with self-driving cars, no one falls asleep at the wheel, or gets distracted with a phone call or a text.

Buffett’s been paying close attention to these developments:

At his 2014 shareholder meeting, he called self-driving cars a “real threat” to the auto insurance business.

He understands that these vehicles could virtually eliminate car accidents.

But when you pair a self-driving car with other “Internet connected devices,” even more amazing things can happen

A Doctor on Your Wrist

Last month, a popular IoT company went public on the NYSE: Fitbit, Inc. (FIT).

Fitbit makes wristbands that monitor your physical activity—and through the Internet, it feeds that data into various “apps” that help you live a healthier lifestyle.

Fitbit sold more than 11 million of these devices in 2014 alone, and the company is now worth more than $8 billion.

That’s already impressive—but it’s the future that has us most excited, and that has Buffett so afraid:

You see, in addition to simply tracking a user’s physical activity, Fitbit can also track vital health statistics like your heart rate.

And since it’s connected to the Internet, Fitbit also has the ability to communicate with other devices—like your car.

So now that you understand all this, let’s go back to the “heart attack” scenario we described earlier...

Imagine you were having the same health crisis, but this time, you’re wearing a Fitbit wristband and you’re in a self-driving car.

If the Fitbit detects that you’re having a heart attack, it will send a message to your car to find the nearest hospital and navigate there immediately.

This is a major technology breakthrough—and a major health breakthrough...

But it could spell disaster for Buffett:

Ultimately, less car crashes means less insurance payments to companies like GEICO...

And that means lower revenue, lower profits… and less “float” for Buffett.

How to Play The Internet of Things Revolution

There are a few different ways you can take advantage of this megatrend...

You could invest in large IoT-related companies like Google, Fitbit and even Apple.

But as a general rule, the earlier you invest in a big trend like this, the more profits you can earn.

For example, the earliest investors in trends like “search” and “social” made fortunes.

Google’s early investors—the folks who backed the company when it was still a private “start-up”—made 3,000% when the company went public.

And when Facebook went public, its first private investor turned every $1,000 he invested into $2 million—that’s a 200,000% return, for one of the most profitable documented investments in history.

This is why many of the smartest investors in Silicon Valley are putting their money behind Internet of Things start-ups at a blistering pace...

According to market research firm, CB Insights, IoT start-ups have raised over $1.68 billion in the past 12 months. That’s a 42% increase from the prior year.

And we’ve found a simple way for you to get involved.

Today, you can invest in something called The Internet of Things Syndicate through one of the crowdfunding portals we cover, AngelList.

A “Syndicate” is like a mutual fund. But instead of investing in publicly traded stocks, it pools capital from many individual investors to invest in start-ups.

This syndicate in particular focuses on Internet of Things start-ups. It’s managed by Lemnos Labs, one of the most active and expert venture investors in the IoT space.

Whenever they find an attractive IoT start-up, they’ll let you know, and they’ll give you the opportunity to invest alongside them.

If that start-up turns out to be the “next Fitbit” and goes public for billions, you’ll get your share of the profits.

You can learn more about the syndicate here »

Please note: Crowdability has no relationship with the IoT Syndicate or AngelList. Crowdability is an independent provider of education, information and research on start-ups and alternative investments.

Happy investing.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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Tags: Warren Buffett Google FitBit Internet Of Things IOT Self-driving Cars Driverless Cars

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