Liberal Arts Services

Is Nanotechnology a risky investment?

One of the less-discussed societal implications of nanotechnology involves its impact on the investment marketplace. People may be skeptical given their experiences with ‘dot coms’, overly-hyped Internet related stocks that crashed in the stock market bust of 2001. For many investors, nanotechnology is mysterious and new technology that should be treated with skepticism because of its potential to transform industry, products, and lifestyles. Of course, the hype over nanotechnology also carries with it the potential for mistaking surface for substance. Capital is needed for investment involving risk yet much rides on the integrity of the system, as the collapse of the US company Enron in 2002 suggests. Tangible products are generally a good indicator of a company’s progress in research and development. Yet because many aspects of nanotechnology are new, the economic risks are probably less well-known than in more established industries.

While some companies will lead the way in adopting these technologies, if nanotechnology offers an advantage in an industry, others are likely to follow. In some sense, risks are likely to be spread across all of the companies adopting a particular technology. Risks may be narrower for nanotechnology component suppliers—companies whose business it is to produce the components needed for nanotechnology.

Because of the economic potential of this base nanotechnology industry, it is helpful to know the risks in this specific field. Many of these risks are similar to those associated with start-ups from other industries. Yet unlike the dot com boom, many nanotechnologies will be embedded in ways not visible to consumers. Some consumers may not even be aware that a particular product depends upon nanotechnology.

The frequent replacement of new technologies with even newer forms makes the longevity of certain technologies unpredictable. In a famous case in the 1970s, Sony’s Betamax standard was rendered obsolete by consumers who ultimately chose the competing VHS standard. Beginning in the late 1990s, VHS tapes began to be replaced by DVDs, which offered higher video and sound quality.

A new focus on emerging nanotech companies could also alter the flow of investment capital from other emerging industries such as supercomputing and biotechnology. Such a flow, with a focus on nanomanufacturing, could also alter the allocation of raw materials and precious metals needed for new kinds of manufacturing.