We are living in extraordinary times. In times of euphoria and a sudden increase in unemployment globally. It is the information age with excellent connectivity through social media and other technological mediums. You can connect to others, create communities, form coalitions, and build. Conversely, you can create fake news and spread it at a faster rate.
If you have a long term vision, plan it out and work hard for several years, you can pull off amazing feats. For instance, the year 2020 sheds light on a global pandemic. It also showed evidence that you can create a private space company with reusable rockets and send two humans on an extra sleek ship to dock at the International Space Station during a global pandemic.
The world is pleading for a change in more ways than one. It needs more fascinating ideas and techniques to push it forward, and now is the best time to start to make a change.
Why is now the best time?
The World is In Flux
Lack of Trust
I don’t know about you, but it seems like people are losing trust in seemingly neutral organizations like the World Health Organization and even respective governments. Protests, lack of stability, and disintegration of the fabric of collaborative society are increasing across the world. It seems as if there will be a rise in protests over this coming decade as more disintegration occurs. Interestingly, traditional institutions such as central banks are becoming more aligned across the world in monetary policy, while governments posture on trade, and espouse more protectionist policies.
Traditional institutions will stick around (like GE) but do not make sense. There will be more reorganization around new leaders.
What’s the problem here? A lack of trust can slow down productivity and erode prosperity in more ways than one.
If you don’t trust different others to act in your best interest, you position yourself accordingly. A portion of mental energy is devoted to defense over offense actions (like building consensus, tools, and participating in activities that create foundational progress).
Solution: Technology responds to a growing lack of trust with the blockchain, more communication, and increased transparency.
At the same time, technology helps you to gravitate to present thoughts and discussion, meaning you follow who are you are or want to be like. There’s less paying homage to old guard and parties, there’s more leaders and tribes. Social Media feeds you the content and ideologies you like based on your choices and distort reality. It does not help you bridge the divide, the chasm between how you see the world and how others view it. Social media platforms lull you into the comfort of the novel and provocative yet familiar. That’s a lucrative problem to work on as many people realize this problem but still, use traditional social media because it works and gives them a voice. It is difficult but necessary. Platforms that help to build communities can thrive.
COVID-19 Creates Change
Everyone knows that COVID-19 helped to pull work from home and other technologies to the present. It helped to accelerate growth at a faster pace and will continue to provide more boost to people working on tools and communities in this sector. The opportunity here is to think about how to create earnings online (through a course, or a SAAS product, a media site) and or build tools that help to foster remote work and collaboration.
Destroying Illusions and Creating Others
COVID-19, in my view, is unmasking different truths and shattering illusions.
Again, it places the legitimacy of seemingly neutral organizations into question. The pandemic shows the competence of some government and the vast incompetence of others. This lack of competence spills over into other aspects, from testing and treatment, to cost of healthcare, and supporting locked down businesses and others during this time.
Solution: The pandemic forces you to think about being responsible, doing your research, and not just trust the experts to steer you through life. The concept of forcing you to think is quite likely one of the positive externalities of the pandemic. Thanks to the vast library of the world wide web, you can research from the comfort of your bed. It is up to you to do the due diligence and protect your base.
Lower Interest Rate Policies
We saw that economies aren’t as healthy, robust, or thriving as it seemed. Further, the economy is not the stock market and vice versa.
Governments across the world rolled out economic stimuli and loosened credit policies, pushing more nations to head close to lower costs of bank borrowing. This policy means one thing for lenders and another for borrowers. Lower cost of capital is an issue because it punishes savers and lenders (fixed income investors and pension funds) and forces them to invest it into higher-yielding investments. A low cost of capital environment with low inflation is a boon for those who can borrow and use money or credit wisely to produce excess returns and robust service debt.
That is an excellent policy if it helps to create more sustainable jobs tackling problems or opportunities that matter in the world today. It has been in place in the United States, in Europe, and in other areas over the past decade. They seek to target a comfortable level employment, inflation, and valiantly fight against deflation. A critical question one should ask is, was the lower-cost financial capital allocated wisely in the last decade? If you are looking at the capricious stock market, valuations, high corporate, and personal debt loads, you’ll think it is not easy to answer. Further, a lack of earnings in the present and depressed earnings in the future for public companies shows that we have a few problems to address here.
I expect technology companies to fare well in this environment, and I came to this conclusion after COVID-19.
See, I was expecting technology company stocks to fall last in the wake of COVID-19. They didn’t.
We saw resorts, real estate, restaurants, and travel take a hit, but technology mostly stayed strong. I wondered why, then it hit me, if you’re looking for growth and productive use of capital, you give it to an Amazon, Elastic, a Walmart, Paypal, Splunk, or Square. Innovation is happening at a rapid clip. Tesla, Facebook, Google, Amazon, Zoom, and smaller companies are bringing about more products and services that improve lives. These companies seem like they won’t stop growing, have different revenue streams, and will be able to power through recessions.
Of course, not all of these companies are the same, and so discretion is advised.
I believe lower capital costs will foster innovation in modern banking, decentralized finance, artificial intelligence, and bitcoin, among real-life adventures like flights to space with Virgin Galactic, Maxar Technologies, and other privatized human space adventure corporations going back to the Moon, Mars and beyond. Of course, capital sloshing around will produce a few more frauds the likes of Enron and Worldcom along the way. You’ll have to sort through which companies can take advantage of ZIRP and NIRP and which ones are illusory. But it is certain that innovation will prevail across the board.
This innovation is evident with the rise of firms such as Softbank who make large bets that burn cash but might provide information on ways to improve life. For instance, Uber is a controversial company because it seems to lose some money and has gone through some issues. At the same time, it provides opportunities for anyone to earn on their time.
With technology companies, they can solve specific problems for a group of customers and continue to grow while figuring out how to be more relevant. It requires human capital and the right talent to figure out how to broaden services and provide more value. You don’t necessarily need heavy machinery, hard assets, and items that might require a significant investment upfront. You need a general structure that produces the best ideas and amazing people who can create, sell, and execute.
If you are a builder, there’s an opportunity to generate ambitious ideas come to pass and carry them through over the long term.
Opportunity: Whether you are an investor or seeking work, you can stay resilient in technology. Skills such as product management and technical expertise can produce outsized returns in the present and over the long term. Software will continue to “eat the world”, and efficiency will be a necessity. Get involved and continue to improve your skillsets as an investor, builder, or employee.