The Big Idea: Coronavirus: this too shall pass. The pandemic’s most enduring impact will be as an accelerant of existing trends.
Look beyond our unprecedented present and predict the future by creating it.
In any crisis there is opportunity; the greater and more disruptive the crisis, the greater the opportunities.
Three of the largest, and most important, consumer categories in the U.S. (healthcare, education, and grocery) are in a state of unprecedented disruption and, possibly, progress.
1 COVID & THE CULLING
Companies with cash, with debt collateral, with highly valued stock will be positioned to acquire the assets of distressed competitors and consolidate the market.
Firms deemed innovators are receiving a valuation that reflects estimates of cash flows 10 years from now, and discounted back at an incredibly low rate.
In the pandemic, cash is king, and cost structure is the new blood oxygen level.
For companies in a weak position, survival will depend on radical cost cutting.
Companies fortunate enough to be in a position of strength should be flexing their pandemic muscles. They are investing, innovating and growing market share.
Cash is great for survival purposes, but the real gangster move is to be capital light, that is, to have a variable cost structure.
The most visible and widespread trend acceleration is the radical transition to working from home .
Young people will bring cities back because they want to live near other young people and to get access to culture and entertainment.
The Brand Age gives way to the Product Age.
The entire world is bifurcating into Android or iOS. Android users are the masses who trade privacy for value. iOS are the wealthy who enjoy the luxury of privacy.
Premium players will wrap themselves in the blue flag of privacy and collect a nice margin for the courtesy of not exploiting their customers ’ data .
2 THE FOUR
One sector has outdone all the others in the pandemic: big tech.
Amazon is better at FedEx’s own game.
Apple is now the largest player in the watch business.
It’s the flywheel.
Streaming video adds momentum to Amazon’s and Apple’s flywheels.
Big tech’s role in sowing dissent and promoting political radicalization has been so well documented, it has become normalized.
Antitrust is just one tool in the government’s kit for addressing the dangerous power of big tech .
Between Prime, AWS, and the Marketplace, Amazon has the largest flywheel in the history of business.
Business gurus have preached for decades: focus on your “core competencies” and outsource everything else. Amazon flips this around. It doesn’t pay someone else to run its data center. It takes advantage of its massive data center volume, and its ability to invest essentially unlimited capital, and the company builds the best data center management competency on the planet. Thus is born AWS, the largest cloud services provider by a wide margin.
They later spun out Amazon Payments and launched a delivery service.
I believe Amazon will offer Prime members COVID testing at a scale and efficiency that makes America feel like South Korea (competent).
The big payoff for Amazon is healthcare.
Apple owns the most profitable product ever made, the iPhone, and sells it through the highest per-square-foot retail business of all time, the Apple Store.
Recurring revenue bundles are expensive, hard, and enduring.
There is only one path to a dramatic increase in stakeholder value in the face of flat/declining revenues: The rundle — my term for “a recurring revenue bundle.”
Facebook and Google are simply more effective platforms for advertisers.
3 OTHER DISRUPTORS
Industries become ripe for disruption when existing players fail to adopt technological change to improve quality and value, as it may threaten their core business.
If your company was already adept at click and collect, as Home Depot was, the pandemic is more a speed bump than a meteor. If your store was not ecommerce competent (T.J.Maxx, Marshalls) , you’ve suffered.
The charismatic founder speaks in a characteristic dialect: yogababble.
Casper’s numbers illuminate signals of a frothy economy.
The pandemic may birth the best-performing IPO class in several years, as the market’s valuations are based on a firm’s perceived performance 10 years ahead.
The DNA of a disruptor: 1) Appealing to human instinct 2) Accelerant 3) Balancing growth and margins 4) Rundle 5) Vertical integration 6) Benjamin Button network effects 7) Visionary storytelling 8) Likability
THE SHINIEST UNICORNS IN THE HERD: Airbnb, Carnival, Lemonade, Netflix, One Medical, Peloton, Robinhood, Shopify, Spotify, Tesla, Uber, Warby Parker, Coworking
4 HIGHER EDUCATION
The virus has been especially hard on industries whose customers consume the product sitting shoulder to shoulder, like sports, airlines, restaurants, events — and despite their noble mission, universities.
Tax private K–12 schools to supplement public K–12 education.
We need firms (like Apple) to seize the greatest business opportunity in decades and open tuition-free universities.
Gap years should be the norm.
We need national service programs.
We need to encourage two-year community college degrees.
We need to expand the variety and efficiency of certification programs.
One thing we should not do: free college. That’s a populist slogan and a bad idea. It’s a further transfer of wealth from the poor to the rich.
5 THE COMMONWEALTH
We must wrest our government from the hands of the shareholder class, which has co-opted it, and end the cronyism they have instituted to protect their wealth.
Failure, and its consequences, is a necessary part of the system.
When a corporation fails, those who have risked their capital to support it lose their investment.
Letting firms fail and share prices fall to their market level also provides younger generations with the same opportunities.
The $ 2 trillion relief package passed in March 2020 was a theft from future generations.
The three richest Americans hold more wealth than the bottom 50%.
But the fundamental promise of America, of any just society, is that with hard work and talent, anyone can lift themselves up, up out of poverty, up into prosperity. And that promise has been broken.
This is why we need a strong government, to counter human nature, to balance fast thinking and selfishness with slow thinking and community. We don’t need to make idols of the wealthy to inspire achievement.
Dominant firms exploit everything they touch.
The biggest companies are increasingly getting their profits from exploiting another fertile target — their own consumers. There’s no such thing as a free social network app.
The threat of addiction has been slowing our household down. One of our sons demonstrates behavior consistent with device addiction. It’s terrifying. Everything he does, says, and works toward is in pursuit of the dopa hit waiting on his iPad.
Tim Cook doesn’t want his nephew on social media.
Govt provides the rule of law that kept our businesses safe and contracts enforceable.
Govt funded physical and digital infrastructure.
Team Blue hates Team Red because they are putting grandparents in danger by not wearing masks. Team Red hates Team Blue because they are infringing on liberty and threatening the economy over something that hasn’t impacted anyone they know.
We should not rely on billionaires to save us.
Philanthropy is less reliable and less accountable, and it doesn’t scale well.
The most important thing we can do is also the easiest. Vote. Vote in off-year elections. Vote in local elections.
We need to protect people, not companies. My choice would have been to follow the German Kurzarbeit model.
When you give money to poor and working-class people, you see an immediate multiplier effect in the economy — because they spend it.
The first step to restraining private power is to get it out of government. Ideally we would substantially reduce the amount of money that flows from private wealth into political campaigns.
Congress and the Executive must reinvigorate our antitrust and regulatory limits, particularly on big tech.