Yes, There is a Market for Smart Guns (Or at Least There Will Be)
Jon Stokes 03.13.14
If you’ve not yet heard about Global Digital Solutions Inc’s (GSDI) bid to buy Remington and turn the company into a “smart gun” maker, then here’s the quick recap: a small, Florida-based investment company wants to buy one of America’s oldest gunmakers from the Freedom Group and begin churning out “smart guns” by the truckload. Remington has disparaged the bid as a “agenda-driven” and a “publicity stunt” for the seemingly obvious reason that there is no market for “smart guns,” so why would rational investors throw money at the concept?
I don’t know for sure whether GSDI is serious or not, but I do know that they’re not the only evidence that some investor money is flowing into the smart gun concept. There’s Silicon Valley “Super Angel” Ron Conway’s prize-based initiative to jumpstart smart gun innovation, and then there’s German-based Armatix, which actually has a gun on sale now. Yardarm is a CA-based company that’s touting the ability that you can remotely disable their guns. I’m sure some Googling would turn up even more. The list of such efforts is growing despite the bemused outrage from gun owners and gun advocacy groups.
Here’s a heads-up to the gun people who think that the money flowing into “smart guns” is just dumb money that investors will never see a return on: you aren’t paying close enough attention the market or to how investors operate in the real world. Just because gun buyers aren’t particularly interested in buying such gadgetry doesn’t mean that they won’t end up with it anyway. After all, there’s a thriving market for auto and building inspections, neither of which anyone would spend money on if it weren’t forced on them by the government.
This last bit brings me to my main point: smart gun investors aren’t anticipating organic consumer demand for these weapons, but rather they’re anticipating that state governments — and California in particular — will mandate their adoption, thereby creating a market by fiat.
There’s a reason why Armatix is selling its wares in CA first, and why Ron Conway — a politically connected operator if there ever was one — is pushing his initiative out of Silicon Valley. Believe it or not, California is the country’s largest gun market, and if CA mandates smart guns the way that they’ve already mandated microstamping, then smart gun makers will have a very large, very captive pool of customers. What’s more, those few companies that are ready when the time comes will have that market mainly to themselves.
So as an investor, I can definitely see the appeal of putting money into smart guns. It’s always extra risky to place bets on what governments will or won’t do, but in this case the upside could be tremendous. I have little doubt that Conway has already shopped his idea around Sacramento and that he has plenty of state legislators who are ready and waiting to unveil a bill at the press conference where he announces the winner of this $1 million prize.
The smart gun idea may be a dumb idea in theory and in practice, and it may even be a threat to the Second Amendment, but I can’t say it’s a bad investment at this point. I think Ron Conway and like-minded investors may get the last laugh.
