Virtualization – The Next Big Multi-Year Theme

Featuring Dan Arbess

Renowned macro manager Dan Arbess, outlines to Michael Green the opportunities in ‘Virtualization’—the displacement of capex and labor with integrated hardware/software – as a service. He sees this as a powerful driver of the next corporate profit cycle and competitiveness, benefitting shareholders but increasing wealth concentration and creating headwinds to job growth, which ultimately could challenge the consumer economy globally. Filmed on September 27, 2017, in New York.

Published on
18 October, 2017
Topic
Technology, Global Outlook
Duration
25 minutes
Asset class
Equities
Rating
83

Comments

  • Js

    Johns s.

    27 2 2018 11:17

    0       0

    Very informative!

  • yd

    yon d.

    12 2 2018 00:15

    1       0

    Great interview! Way too short and begs for more. I'd like to hear more about the logistics of vertical integration. The water-drip irrigation was an interesting example. I know this irrigation method being implemented decades ago, yet why hasn't software integration solutions been rolled out (or have they?). Again, great interview and begs for more!

  • RC

    Ryan C.

    27 11 2017 06:05

    2       0

    Wow, lets please get this guy back on for a lengthy interview. Way too short.

  • fT

    forecast T.

    22 11 2017 01:57

    0       0

    GE is doing the agricultural thing i believe based on an HBr article on IOT with GE as a mahor example and graphics of tractors and crops water etc aka "process" . So in my case GE is the safe play

  • fT

    forecast T.

    22 11 2017 01:54

    0       0

    Dans providing enough contextual info ...now a matter of googling word combinations of the transcript

  • DT

    Dave T.

    3 11 2017 06:46

    1       0

    This is another interview that could have done with being longer. And with some specific investible opportunities. He got tantalisingly close but was constrained by whatever. More please.

  • MM

    Michael M.

    2 11 2017 00:12

    1       0

    "I can give you a list of 100, probably but certainly a handful of public companies that... are about to benefit from this whole thing" says Dan Arbess. "To take a piece of hardware, integrate them with software data analytics to provide a greater service outcome without the need for capital expenditure... [example] telecom network function virtualization..."

    "I'm back in public markets with my own capital now investing in companies that stand to benefit from this dynamic..."

    Seems like Dan was eager to mention a few of these public companies. In fact he is going to come back in a year to discus how these non-mentioned public company investments worked out. Michael Green why didn't you have the curiosity to ask him for more specifics? Maybe it is because with 2 minutes left in the video you still were attempting to place what he does in the realm of private equity.

  • DY

    Dmytro Y.

    25 10 2017 06:15

    6       0

    Good and intriguing start...but again, this should have been extended to make specific investment ideas, which companies, which industries may be the next multi-year theme? and i dont see anything about Virtualization here.

  • JL

    Jim L.

    25 10 2017 04:03

    5       0

    A good start. I echo other sentiments that it would be good to have him back to discuss listed investments he is interested in. I feel that looking over those companies would provide a lot of context for the ideas he is expressing

  • DS

    David S.

    24 10 2017 19:48

    3       0

    Maybe a follow-up video could be done shortly on some of the 12 companies that Mr Arbess discussed and how they are implementing the program for their customers. DLS

  • DM

    Daniel M.

    24 10 2017 17:08

    1       0

    I like his clarity of thought. He starts with big ideas and chunks down from there.
    Would have liked more specifics with public companies.
    Stayed too theoretical.
    Felt like it should've had another part just as long where he walks us through trade recommendations.

  • JY

    James Y.

    24 10 2017 00:36

    1       0

    I found the middle part of this interview to be quite interesting (Minutes 10 - 15). I found Mr. Arbess to be engaging and the conversation to be relevant. However, I was put off by Mr. Green's comments that most people do not want jobs (except for he and Mr. Arbess because of course they love what they do). I think he presumes that those who do not work in white collar disciplines do not find value in there work beyond as a means to support consumption habits. While I am sure there are those, perhaps even a majority, who feel that way, having worked in the manufacturing and food processing for over 15 years, I can in my experience many people who do value their work and enjoy their craft, even it if is blue collar in nature. Perhaps I am being too sensitive, but that portion of the interview stuck out to me the most as odd and off-putting. If there is one takeaway I had from the 2016 election cycle, its not to overgeneralize the blue collars wants and desires. I agree with the other comments that hearing Mr. Arbess in a longer form would be valuable.

  • MS

    Matt S.

    23 10 2017 16:12

    1       1

    So.....we should buy hosepipes? I think that's what I got from this.

    : \

  • DR

    Daniel R.

    22 10 2017 13:16

    1       0

    Some interesting food for thought. One comment on IoT - I think it is going to have a much longer gestation that most people appreciate. I have a front row seat in early stage IoT and it's really a struggle to find solid ground to build a real business. The device space is so fragmented, and even getting reliable networks to get the data in the field is not really solved. No signs that anyone has figured it out yet.

  • RH

    Rick H.

    22 10 2017 00:46

    2       0

    Loved the conversation and certainly some buzz around iot solutions as of late. Would have liked some actionable ideas

  • MN

    Mark N.

    21 10 2017 22:17

    1       0

    Wow. That was awesome. One to be revisited and revisited and revisited. More more more with this guy, please. :o)

  • SS

    Sean S.

    21 10 2017 17:20

    1       0

    Brilliant discussion

  • PB

    Pieter B.

    21 10 2017 11:56

    0       0

    Fantastic interview guys! Thanks a lot for sharing these ideas!

  • CG

    Christine G.

    21 10 2017 05:24

    0       11

    What a bunch of stereotype and condescending, entitled, self-serving rationalizations - especiallly on the part of Michael Green. I hope he listens to his guest and tries to recover his humanitly in this age of the sociopath as stated by Ben Hunt, e.g., http://epsilontheory.com/sheep-logic/

  • MT

    Mike T.

    21 10 2017 02:54

    7       1

    Virtualization the Next Big Multi-Year Theme?? Guys this is a really old story, maybe ten years old, and I say that from a position of personal experience as for many years I worked for one of the main players in the Virtualization space. I for one subscribe to RVTV for actionable ideas, nothing else, and I note three companies CSCO, VMW & HPQ stock prices have gone nowhere over the last ten years. I hesitate to be critical of RV a wonderful product at an amazing price, but............ is it me or are we seeing fewer actionable ideas since the introduction of Macro Insiders?

  • AH

    Andreas H.

    20 10 2017 20:00

    0       0

    love it, just too short! .-)

  • AH

    Andreas H.

    20 10 2017 19:40

    0       0

    love it!

  • PM

    Paul M.

    20 10 2017 10:51

    5       0

    Very interesting angles, very insightful but I wish examples of companies that benefit from these major processes were given. Also, for me any discussion on macro themes must involve at least some discussion of USD. Personally, I would be extremely interested in what Dan has got to say on that so the interview feels a little incomplete.

  • OS

    Ollie S.

    20 10 2017 04:59

    9       1

    short format -= bad

  • VM

    Vincent M.

    19 10 2017 23:17

    7       0

    Really do not like the short format. Also, need to get one or two actionable ideas. Not so broad but clear enough to do something with them ... love the summary idea page.

  • PK

    Peter K.

    19 10 2017 22:35

    5       0

    Smart guy but I read these ideas in newspapers. Where are the actionable ideas? Buy in the public markets? verizon?

  • AL

    Andrew L.

    19 10 2017 14:31

    10       1

    Totally agree that society needs to refocus on providing people with meaning and purpose. Jobs are increasingly failing at providing opportunities for this. I think the new vanguard on this issue is a nascent resurgence in the religious life leading to more tightly knit communities (not in terms of cities or towns but groups of like-minded people) and a re-valuing of raising a family and more single earner households. It remains an open question if we can fashion society to financially reward meaningful vocations in an increasing manner, in the face of the current trend this would be a 180º turn. The opioid crisis and shifting economic and cultural landscape gives a stark antithesis and impetus to this vanguard.

    Universal basic income aside from being un-dignified is also a dynamic that is inherently unstable and regressive. It will necessitate price controls in at least housing which will be the first in a series of creeping government interventions to keep the hand-outs doing what they are supposed to do. This dynamic would be the new standard political debate, increase the handout our increase the price controls. Inflation vs stagnation. It naturally gravitates toward a less-free-market and less incentive for entrepreneurs.

    Our culture and economy are in secular decline, all of the "innovation" we see in technology is in-fact the rise of coping mechanisms in the face of a shrinking pie. As that pie shrinks we see seemingly dynamic and growth oriented economic activity and it is rightly described as increasing productivity. But make no mistake these are the death throws of the economy. When that productivity does not produce new jobs it is actually an economic regression. The information and gig economies is perfect examples. As technology is applied to more and more business problems productivity increases many jobs are made unnecessary and prices come down. This displaces slower moving often older institutions with smaller nimbler ones. This looks on the face to be dynamism and healthy but it is best characterized as increasing share of a shrinking pie both in terms of the remaining work-force and the remaining companies and overall economic activity. As productivity increases and prices decrease and jobs disappear economic activity and the velocity of money drops so how do we keep the economy rolling? This would be a deflationary spiral if not for the effect of inefficiency to balance it out. And it is here that we see all other economic activity taking place, health-care and defense-contractors (and war) are a perfect example here. Without a dramatic increasing of inefficiency in the market we would be sunk economically. It is yet to be seen if this inefficiency is merely a temporary stop-gap to bridge us from one economic reality to another or if it will persist and grow over time. I expect the latter.

    IoT is not the great disruptor that everyone thinks it will be, it is merely the new shiny, some efficiencies can be wrung out of it but of course it comes with it's own costs and will largely reflect the above mentioned dynamic of a larger slice of a shrinking pie.

  • SB

    Sergei B.

    19 10 2017 13:40

    5       0

    A great teaser that left me wanting for more details, i.e., further analysis of micro-irrigation service .. how exactly selling of hardware components was replaced with selling of service -- a powerful idea that dies or lives in the details of its realization, I would think. Thank you, Michael Green, for being a patient and perceptive interviewer!

  • RI

    R I.

    19 10 2017 10:11

    22       0

    Embarassingly short interview that doesn’t delve deeply into anything of meaning.

  • JV

    Jason V.

    19 10 2017 10:00

    37       0

    24 minutes?! RVTV's strength was long, in-depth interviews where salient topics were explored and elucidated. This new 'short format' direction produces piecemeal conversations that hurriedly jump from point to point in the interest of sticking to an arbitrary, self-imposed time limit. It sadly feels like RVTV has turned its greatest strength into a weakness. It is very disappointing, because this interview between Dan and Mike promised so much.

  • MC

    Matt C.

    19 10 2017 05:12

    18       0

    Interesting discussion. Sounds like Dan had a lot more to say on the subject that may have uncovered some investible ideas but was cut short no apparent reason.

  • T~

    Tshort63 ~.

    19 10 2017 04:16

    5       0

    I seldom vote thumbs down but this interview did not work for me. Academic though about dignity and the role work plays in our identity. I'm great right up until the water/nutrition as a service. Not that it is a bad idea but manufacturers sell their products all the time as a service in gain share arrangements. Personally, and I am often wrong, I saw two big and powerful brains pontificating (I'm ok with that) but when the rubber hits the road and things come down to execution I'm not getting it. If it was a horse race I would not bet on this horse. No offense, just my $.02 of random feedback. Thanks RV for more great content to consider.

  • VV

    Vanessa V.

    19 10 2017 02:02

    1       2

    I am personally very grateful to the incredibly smart minds who offer their time and input to RV subscribers, however short the interview. Fabulous fresh input here. And I love Mike Green! He is such a deep thinker who asks insightful questions. I find myself pondering about RV interviews long after I have viewed them. Great job, RV team!

  • sm

    stephen m.

    19 10 2017 01:33

    1       0

    Agree with the comments and interesting discussion but actionable ideas are out there real or not the market is already paying big multiples for these type of businesses Keeping it even simpler to business models that are based around data and service as competitive moat lead by technology. I run a screen of approx 70 companies positioned aroundnhese business models and act is up 60 percent ytd. I think a number are over valued but thememis ever present today and the markets are shrinking with disruption by sector. Would love to see an oil type analysis were you go back and forth with expertise and discuss sectors and names. Just a thought. Great and very imp topic

  • HJ

    Harry J.

    18 10 2017 23:52

    5       0

    Mike, ayn rand fan or not, is the best.
    I have been in the agri business for years and understand Don.
    I need a way to invest in this idea.
    Actionable ideas are the need each person has to do their du

  • JS

    John S.

    18 10 2017 22:26

    34       3

    Excellent but yet again a discussion with huge potential was truncated. The 30 minute time limit is becoming annoying

  • ns

    niall s.

    18 10 2017 22:21

    1       0

    Could it be that technological developments and the displacement of people is partly what is driving the markets higher, since a company's cost per unit of production are falling and the doom mongers are completely wrong ?
    Or is it just a lack of sellers this side of a tax cut ?

  • CH

    Colin H.

    18 10 2017 21:36

    8       0

    Dan was right to call out the interviewer wrt thinking all people don't want to work or have purpose in their lives.

  • MV

    Martijn V.

    18 10 2017 21:26

    17       3

    As an IT-professional advising hardware companies transform into service providers (or not), I can say that it is too easy to project such profound changes, as if ubiquitous. Most of the virtualization (or commoditization) comes from price-drops in memory and computing power. It differs very much per sector how commoditization will give opportunities for service-models (agri is indeed certainly viable). Looks like the blockchain-hype: it actually just has a very small range of applicability.
    And I do not agree with some critiques about the absence of investable ideas. Macro-trends are hard to discern. These are given here so you can do your own homework.
    I do agree on the shallowness of the coverage of the topic in this interview (and virtualization is indeed not the right term here).
    Not trying to be annoying here but the massive adoption and spread of very poor quality of software and hardware, mainly IoT, is polluting the world in such a fashion (privacyleaks, cyber-attacks, zero-day exploits, bugs, etc) , that a whole new industry of cyber-security, pen-testing, application-testers, etc has become a multi-billion industry out of nothing, and is also requiring an increasing and already huge amount of compliance and regulatory apparatus (even more jobs). Just like cars and garages, etc.
    Topics very relevant, but only touched upon here.

  • DB

    Douglas B.

    18 10 2017 21:21

    19       0

    Great potential, but highly disappointed in the time allotted for this interview. There is so much wisdom and that could be gleaned from Dan, that it’s a shame that I feel completely teased right now.

  • TJ

    Terry J.

    18 10 2017 20:50

    6       0

    Dan's philosophies on government, employment etc. are a definite breath of fresh air. If only we had people like him representing the American citizen on Capitol Hill instead of the bought cronies who hold most posts, the world would be a much better place. While I am a fan of concise interviews, I agree with everyone else's comments that when you uncover a gem like Dan, we need longer to understand and benefit from his investment thinking.

  • GS

    Gordon S.

    18 10 2017 19:51

    22       0

    Good interview, but as many have stated, far too short. Since being already familiar with the discussed topics, I unfortunately also didn't learn much. I loved the depth and breath of RV in the old days. Now that over the years you have been able to educate your audience on a wide range of topics, it would be amazing to dig even deeper. Sadly, I feel like it's going the other way; interviews are shorten to no longer than 30 minutes and the amount of "tidbits only" has increased significantly. As suggested recently, if you have many viewers that are short on time, why not make a 30 minute summary for those not willing to watch a longer format interview?

  • MH

    Mark H.

    18 10 2017 18:23

    3       0

    Excellent. Would be great to capture Dan's idea on hedge fund structure that he was talking about and on a separate note, dive more deep into investments in software and how does he setup trades in a over-priced market. Thanks.

  • GS

    George S.

    18 10 2017 18:22

    1       2

    This was fantastic! Now it's time for us to roll up the sleeves and dig into the theme.

  • MC

    M C.

    18 10 2017 17:59

    2       8

    I like Mike's interview style but am mildly devasted to find out he's Ayn Rand fan...

  • BB

    Brian B.

    18 10 2017 17:39

    12       0

    Maybe my understanding of virtualization is slightly warped and completely wrong but I don't see why this video was titled as it is. I followed the link expecting a deep discussion on the topic only to get a couple of snippets at best in the midst of global macro discussion and teasers for possible trade ideas. I agree with the other feedback given that this interview deserved to be longer, possibly getting right to the heart of the virtualization and IOT discussion.

  • BB

    Bill B.

    18 10 2017 17:00

    6       0

    A great beginning, lets see more on these topics.

  • IO

    Igor O.

    18 10 2017 16:57

    14       0

    Maybe good idea to make short overview for somebody who is short on time or expect list of companies in every interview and doesn't want to watch and full version for everybody else?
    24 minutes way to short for this interview.

  • RM

    Richard M.

    18 10 2017 16:21

    12       1

    Really nice interview - it absolutely could have/should have been at least an hour long interview so Dan could have fleshed out his ideas more! [really liked that drip irrigation idea - would like more info on that!]. Also another great Mike Green performance! :-)

  • DG

    Daniel G.

    18 10 2017 15:59

    9       1

    I think another half hour would've been good. He clearly has a lot of insight and I feel he just scratched the surface of what he could share. Agreed, Mike has become much much better and I enjoyed this.

  • CY

    C Y.

    18 10 2017 15:27

    14       1

    This conversation was golden. I could have listened to him for hours. Original ideas are hard to have in our industry and he had several. Mike Green's interviewing has gotten unbelievably better.

  • PN

    Pedro N.

    18 10 2017 15:09

    1       0

    Very inspiring interview.

  • PU

    Peter U.

    18 10 2017 15:04

    18       0

    Not enough substance/details in that interview. Good cocktail discussion, however short on details.

  • LV

    Liam V.

    18 10 2017 14:52

    9       0

    Great video. Very thought provoking but way too short!

  • KD

    Ken D.

    18 10 2017 14:40

    27       8

    Brilliant! But where are the investable ideas? I don’t subscribe to RV just for intellectual stimulation. This is supposed to be an inveatment service. How about including the names of companies n