Contrarian Thinking- My weekly newsletter where we challenge the status quo to achieve what most won’t in business, startup investing, wealth building and doing things the contrarian way.
COVID-19 has been dubbed the Great Accelerator, accelerating trends already existing in the world around us. It didn’t take a rocket scientist to see that once consumers figure out how to do e-commerce, delivery, and tele-medicine, many of them would never go back to waiting in a doctor’s office with snarly Susan at the front glaring at you behind a glass panel while telling you the doctor was, “running behind schedule…” again.
I can tell you one thing, if I was a worker in traditional industries that have an easy ability to be outsourced to automation or online components, aka Susan, I would be trying to add massive value. Those in person reactions are going to need to be increasingly EXCEPTIONAL in order for them not to be given to sanitary, cheaper, never late, and can’t get sick robots.
We aren’t alone in this theory that as the dust begins to settle a bit, COVID-19 is proving to accelerate the very things we knew were coming. Industry tech pundits have said that the pandemic has brought “two years of digital transformation in two months.” Morgan Stanley highlights an acceleration of e-commerce and delivery (no surprise there). Many sources have reported on it being the great accelerator of retail bankruptcies ala Neiman Marcus, J Crew, Pier One and the list goes on.
We all just didn’t realize how quickly the tides would turn. Many tried to crystal ball the future while we knew nothing about COVID, but that’s about as useful as Fauci’s coronavirus models were.
Side note: I wonder if the new punchline for sloppy investment models will be – he did a real Fauci on that one. In the meantime, I’ll just chuckle to myself as a few people unsubscribe at the audacity. I’ll also remind them that trusting government officials who told us masks don’t work – No WAIT PSYCHE – they not only work, they are mandated and we are going to allow people to dox ladies we now call Karen, for not wearing one. Ahem, we (your government) just lied a little bit to you about the whole masks not working thing because we thought you self-serving citizens would hoard them like you did toilet paper. Clear as mud? My next post may have to be about the simulation we are now living in run by Kanye West, Elon Musk and some masochist.
Bemoaning aside, Catastrophe is a catalyst for change.
Here’s how I am on the ground seeing COVID-19 change the world around us, in our 65 portfolio companies, across the small startups I invest in, and in the acquisitions we are making. Let’s break down ideas for how to turn lemon into lemonade, or should I say how to distill hand sanitizer into alcohol so we can forget the entire world?
From cannabis, to capital investing, to increasing your own companies’ sales, opportunities are actually, all around.
You could also check out my 28 Ideas for Side Hustles.
Read this list, think about your business, your job, your side hustle and ask yourself, how can I skate where the puck is going? How can I apply these ideas to my business? Below I give you opportunities and some ideas you can take and run with. Opportunity is found between uncommon practice and common sense.
We knew delivery was coming in traditional industries like food and clothing, heck it’s been here for a while. In cannabis we weren’t sure, it’s a tricky game that many (i.e. Eaze) failed at. However this pandemic proved its viability, cannabis deliveries are up 5-6x with the average basket size increasing by 40%.
ACTION IDEA: Can you setup delivery for some aspect of your business? Or a business you love/invested in? Can you partner w/ a platform like Drizly or Onefleet for last mile delivery?
We all know e-commerce is going bananas. What you may not know is that live-commerce ala QVC across the world is skyrocketing too. The Chinese live-streaming e-commerce market started in 2016, hit $63B in sales in 2019 and expected to double to $129B in 2020. QVC however – generated just $11B in 2019. The business model is to give influencers, hosts or shopping parties a platform where users can click on their phone to buy the items talked about. Look at platforms like Taoboa Live (increase in 110% YOY), just one host there raked in $390M in sales in 2018.
ACTION IDEA: If you have a product company, why not sell it through China’s QVC?
Apple is looking to take 20%+ of its production out of China. Apple is just the tip of the iceberg. These global trade tensions and logistical realities are only increasing. Where in your business can you help localize it?
ACTION IDEA: A fun, quick side hustle would be to sign up for Amazon affiliates and create a list of all made in the US products to compete with ones typically made in China in an area that interests you. Post it on your social or email around to friends and family. Aka – bathing suits under $50 all made in the US, or t-shirts all made in the US by people of color etc.
Could also ask how to help your company with localizing your supply chain. There’s job security or for us investors, opportunity to optimize movement of global movement in companies like Flexport (global freight logistics company valued at $3.2B).
Been to Home Depot lately? I haven’t waited in a line that long since my college Vegas club days, allegedly. Online design service Havenly has increased sales by 2-3x since COVID, Lauren & Wolf (another competitor) has seen total room purchase prices increase 20x according to Trends.
Distressed Small Business Acquisition
Bankruptcies are going to rise in small businesses. Just look at what happened in 2008-2009. As soon as the government stops giving away free money, we will see companies fold. This is a GREAT time to think about acquisition. Tired baby boomer owners are now tired and scared to work.
ACTION IDEA: How can you take a tired business model, aka drive in movie theatre, and future state it? Can you buy a distressed theatre and outfit it with 21st century aspects. I.e. – VR glasses, text reminders, outdoor food delivery a la Sonic, rent out during day to churches, or as a dog park.
This robot bartender is going to pay the people it puts out of a job a monthly stipend supposedly. Like most UBI plans it’s sparse on details and high on PR but an interesting idea.
One of our portfolio companies has a $1 MILLION expense each year to a third-party contractor for rolling pre-rolls, a $300K machine replaces labor costs and we get a positive ROI in one quarter.
ACTION IDEA: How can you use automation to prevent future shutdowns from stopping your business? How can you augment w/ automation?
From decreased interest to getting on airplanes to mandated quarantines upon travel it’s no surprise that staying local has become a trend. Which is why cabin rental descriptions on Airbnb are skyrocketing. That “wanna getaway” feeling is widespread but downsized. KOA’s annual Camping Report (I’m sure you read this bad boy yearly), has said 4 out of 10 people are interested in replacing a vacation this year with camping.
ACTION IDEA: Might be time to sell some of your old camping gear on Craigslist. Offer to do so for an older neighbor for a cut. Or finally crowdfund that antimicrobial backpack you want to create.
I think we’re moving towards more focus on health, immune systems and longevity in an illness focused world. Maybe I should say I hope* we are. In that vein, I’m intrigued by subscription-based businesses around health and wellness such as Ritual, Mirror (just acquired for $550MM), and I’m tracking Tonal which a few friends invested in.
Fun fact: did you know in Japan they are using exoskeletons for the elderly to delay retirement. This suit allows you to pick up 55+ pounds. Think of it like a backpack muscle suit.
Gig Economy Transition
When 1 in 3 people in the US gets fired all at once people start to change their mind on employment. Those who have eyes to see will start trying to think about building non-in person income streams for themselves or helping other people do it.
ACTION IDEA: Check out my 28 Ideas for Side Hustles.
The world is changing but change always presents opportunity if you are nimble enough. The question becomes, are you the oak tree that snaps? Or can you bend and restraighten like grass (Puns.For.Days).
Cannabis Fact of the Week:
Did you know Cannabis is now in space? No, astronauts are not getting high (#dadjokes), it was sent up by SpaceX to see how it cultivates in space. Fancy that.
DISCLAIMER: This is the be an adult section, not advice, just what I did. Said otherwise: This article is presented for informational purposes only, is an opinion, and is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Entourage Effect Capital, LLC, Codie Ventures, LLC or its affiliates. All material presented in this newsletter is not to be regarded as investment advice, but for general informational purposes only. Day trading and investing does involve risk, so caution must always be utilized. We cannot guarantee profits or freedom from loss. You assume the entire cost and risk. You are solely responsible for making your own investment decisions. We recommend consulting with a registered investment advisor, broker-dealer, and/or financial advisor. If you choose to invest with or without seeking advice from such an advisor or entity, then any consequences resulting from your investments are your sole responsibility. Reading and using this newsletter or using our content on the web/server, you are indicating your consent and agreement to our disclaimer.