Spotting Disruptive Innovators That Destroy 401(k) Wealth

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Whether you are a fan or not, you probably remember the first time you heard of an iPhone. Released June 29, 2007; every major smart phone released since has been, in some way, a response to it, and Apple has undoubtedly changed the way humans interact with their phones and the internet. Whether or not the iPhone is your gadget-of-choice, it’s a great example of disruptive innovation—a new player in a market leveraging existing resources and technology to create something entirely new, better, and eventually cost-competitive.

You’ve undoubtedly participated in disruptive innovation as a consumer. You may notice that as a disruptive innovation starts to occur, incumbent companies tell you, “They’re crazy. You don’t need this. They’re never going to make it.” And that may be true—and it may not. Disruptive innovations are initially considered inferior by most of an incumbent’s customers. Typically, customers won’t switch right away and aren’t lured by a lower price. Instead, they wait until its quality raises enough to satisfy them. From there, they adopt the new product and happily accept its lower price (Think about companies like Uber, Coursera, Nest, Netflix, and Instagram). “Oh, snap!” Suddenly everyone “Needs a Thneed,” and legacy brands scramble to catch up.

What are the tell-tale characteristics of disruptive innovation?

  1. Entrepreneurs with unique business models
  2. An existing market where customers are “overserved” but not really getting exactly what they want (the product becomes too sophisticated and overpriced)
  3. The new product or service is more simple to use, convenient, and ultimately affordable
  4. Existing and established companies ignore the danger, because the startup is slow to ignite and takes longer to develop
  5. Consumers flock to the new product en mass, either shaping the current market or creating a completely new market
  6. Legacy market leaders scramble to catch up

This mostly entrepreneurial behavior gives innovation and technology a huge boost. It’s one of the reasons so much technology can be readily available to so many. And as consumers it can be fun to watch—as long as it doesn’t negatively affect your portfolio, of course.

Disruption is the new norm, and our economy can be profoundly affected by how large, existing industries perform on Wall Street. Remember if there’s a disruptor, there’s always at least one disrupted—usually a legacy brand that could face steep declines, loss of market leadership, and even extinction as the startup goes from the underdog to the top performer (think about brands like Nokia, Blockbuster, Borders, and Kodak).

Big brands usually lose when it comes to disruption, so when you look through a stock market lens, you have to ask yourself if you can predict the disrupters who succeed vs. those who don’t. If so, you can win on the market. If not, you lose.

This is only one reason why we recommend all day, every day that you don’t dip into the stock market using your retirement money via 401(k). Tracking and predicting disruptive innovation can be fun if you’re not playing with your future security. Our recommendation?

  • • Buy whole life insurance with a cash addition
  • • Sock away money while you keep your retirement money safe and secure
  • • Give yourself a loan to pursue your stock market picks
  • • Pay yourself back regardless of the outcome
  • • Repeat if you’re feeling lucky

How? We would enjoy sharing ongoing education and a new financial strategy with you. Take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal strategy and start changing your wealth paradigm!

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