Happy Holidays everyone, 2020 was a year to remember for the readers of our blog (not a year to forget). Individuals who were extremely liquid and ran businesses with little to no overhead (internet based) generated large amounts of money. In addition, we saw an acceleration of technology by about 3-5 years (everything that should have happened by 2025 is happening now: remote work, decentralization and scaling of individual talent to levels never seen before). This is a good time to take a break and review the reality of 2020 and beyond.
Less Overcrowded Cities: For better or worse, companies have learned that there is no value in keeping everyone in a single office if their work does not require any physical contact (Internet, software, knowledge work). All of these professions which range from technology to financial services will no longer need large amounts of overhead. Why pay $500,000 a year to lease a huge office if the productivity can be tracked without the overhead? It makes no sense.
This means you will likely see smaller office spaces dedicated to decision makers and future decision makers. While we’ve seen the news related to China and other Asian countries that have been open since April/May, the profit margins are too hard to ignore at this point. Yes, cities will still exist. No, the individual office scale will not be the same.
If you are reading this and are currently working remote, it is smart to get out of your expensive rent if you live in a major city. Using NYC as an example, put in your 30 day notice and move somewhere cheaper (much cheaper) where you can do your remote work. While it is a headache, it’s clear that things won’t be “normal” for at least another 6 months and that should easily offset any moving costs. In short, as it relates to any reader here, if you’re renting in a major city it is time to leave.
Now What? Well, you’re living in a place that is likely further away from the major city in your area. All you really have is the internet and some sort of income from your tech/knowledge based work. What is the next move? The next move is to predict the needs of people who are recently out of work and are looking for help.
Item One – Spirituality: Religion will likely boom. We’ve been talking about this for over a year. Beyond religion there is also the broader industry of “spirituality”. This means you’ll see an increase in other businesses related to tarot cards, palm reading and anything that helps people “see the future”. For people in Asia, this would be equivalent to Feng Shui and Chinese Astrology.
To be clear, we’re not experts in any of these fields so we’re sure we missed the biggest ones. That said, if someone is an expert in these topics we’d expect your business to do quite well. Find a new angle into the industry: 1) selling luck charms, 2) selling prediction charts, 3) selling consulting on how to create the best Feng Shui, 4) selling courses on how to increase your luck/spirituality and 5) creating a new way to accurately improve a persons “aura”.
The last one, which sounds the weirdest, is likely the most profitable. People are going to be looking for answers when this is all over. You can either sell the products that they are looking for, or compete directly and offer something entirely new. Our best guess is that the easy returns will be related to industries that already exist (Feng Shui, various religions, etc.).
Item Two – Mental Health: There is going to be a LOT of cleaning up to do when this is done. Imagine being a 22 year old with debt who recently lost his/her job. After 12 months of lock down, you are likely out of cash and haven’t been paying rent (evictions will not be pretty). We’re not thrilled about this and have already explained our distain for the decisions that were made.
That aside, there is room for a mental health therapy application/software company. It’s unclear how successful initial ideas similar to this will be. However, we’d bet a lot of money that there will be a successful mental health related app. Take Calm for example which ended up exploding in value over the past 5-years. This was directly related to meditation/sleep and mental health is probably the next step in the process.
Currently, we’ve seen several ideas including an artificial intelligence based app that talks you through your problems. There are standard consulting services (which should boom) and there are mental health tracker type apps. As you can see, there isn’t much and the standard ones are likely doing well. Either go for broke and try to solve the problem in a new way, or jump on the least risky wave (individualized services).
Item Three – Only Fans and Drugs: We wish we were kidding. However, degenerate items such as weed/escorts will be on the rise. Only Fans is offering an insane affiliate offer which suggests they are generating huge EBITDA margins and have high quality LTV of each popular user.
This is a tough one to monetize because industries like Only Fans and Drugs scale without much need for outside money. This means it will be difficult to find a way to invest into Only Fans or into a new drug/medicinal drug related industry. Therefore you’re going to have to become part of the sales channel: yes we are saying it would be wise to become an affiliate for something like only fans or CBD or the next popular drug.
We’re not here to say that this idea is “good or bad” from a moral point of view. Instead, we’re only highlighting it as a clear growth industry for the next 5-10 years. We have a few ideas that will likely grow due to the growth of these two industries but we intend on competing in them over the next 2-3 years so we’ll leave that out. In short, if you believe that Only Fans and Drugs will see extraordinary growth over the next several years, it is likely that other industries will benefit as well.
Item Four – Lots of Single Adults: No doubt about this one either. The 20-40 age band is going to be volatile to say the least. Many are likely unable to afford kids (forcing them to remain single) and the options for the top 5% of men will explode. If you’re a successful male and you survived this pandemic, you’re in the small minority. This is a rough set up for a large chunk of the millennial generation.
This also means it is likely for people to live in larger households. Instead of seeing young adults living in a studio/1 bedroom apartment, it will be common to see young adults living in larger homes with multiple roommates.
Assuming the above is correct, you have your answer on your real estate exposure. While we would avoid large RE exposure at this time (tax target), looking at homes that are easy to rent will have to fall into the above category. The ideal rental is in an area with a good school system, good/decent weather and a low tax base. For example if you own a 3 bedroom home in a suburb of miami (10-15 minutes driving to the main city) you’re probably in great shape. If you own a 2 bedroom condo in downtown NYC or SF, the future is likely a lot rougher.
Item Five – Massive Globalization: Once the pandemic is complete (go ahead and use end of 2021), we’re quite positive on international travel. The good news is that you can find cheaper places to live and the bad news is that cheaper labor will compete for your career/business/job. Before the pandemic, there was a lot of political weight put on being inside an office. After 2020, many firms (particularly the smart ones) were able to figure out who was producing and who wasn’t.
The main concept here is that you should outsource everything except the product and the sales. Even sales is becoming ambiguous as AI becomes better and better at targeting and selling the “right” way. For now, there is no reason to hire for any other type of position. Either a product type role or a sales type role and that’s really it. All other hires are simply dead weight.
Conclusion: Feel free to stop reading here, the big five were above. Instead we’re going to outline a “stream of consciousness” as it relates to the next 3-5 years. This is not going to be organized in any particular way and is simply going to be a “rapid fire view” of what is going to happen in the future.
Big Picture: The big picture is that technology has been accelerated by 5 years or so and that companies have learned a good 30-50% of their headcount is unproductive. There is no need for multiple middle management layers and there is no need for low end labor when software can do the job. For example, budgets can be blocked/allowed based on certain metrics making it difficult if not impossible to cheat the system. If there is an exception then they must email the decision maker. This creates one job in total when there used to be 10-15 (people organizing all the budgets and approving each transaction manually).
The other big picture item is that remote work is here to stay. While it won’t be as drastic as it is today, the days of cramming every single person into an office building are over. There is just no need for that. You need a way to prove that the person is performing (KPIs/sales metrics etc) and that is about it. Based on merit you can then promote that individual to a new role, training other people to hit his/her metrics. A true meritocracy with minimal politics. Before moving on, there is zero chance that office politics go to zero. We’re simply saying the trend is for *more* meritocratic system. Since politics are harder to get away with if your numbers don’t show up.
Lots of Broken Families/Businesses: The shut down has crushed tons of small and medium sized businesses. This means you’re going to see the lives of many many many middle/lower middle class families collapse. This is absolutely terrible. Since the government mandated the shut downs and didn’t take a payout, you can imagine that government jobs should be created to help offset this pain. An infrastructure bill is an obvious answer.
Infrastructure Means Taxes: Following the same premise, these new government jobs need to be funded. The best way to fund that is by taxing the rich. So if you’re a well off individual get ready for taxes to go up! This is one of the major reasons why a liquid portfolio is better. If you have liquidity you can wait out taxable events. For example if the tax rate is low in 2021 and is going to be much higher in 2022, you can pull in all your sales/income into 2021. This then gives you a balance sheet to work with in 2022 where you don’t need to incur any capital gains taxes. In short, think about taxes when you make decisions for next year.
More Polarization: We’ve seen it with politics already and the play book will continue. More polarization. Expect more and more people to take sides going forward. This is related to all politics and it is related to all emotional topics. Don’t be stupid. Avoid conversations related to money, politics, sports and religion at all costs. If someone forces you to talk about it, make sure you get them into a 1v1 situation and agree with them. Smile, nod and agree like you’ve practiced for the past 5-6 years.
Money Supply Goes Up: You cannot have 20-30% of businesses go under because you forced them to run at $0 for a full year (or more in this case). Therefore they will continue to print money. They being governments around the world. While Asia is in better shape (since most of it is back to normal) the vast majority of countries will be printing money. As we’ve stated, we’re definitely not happy about Asia benefitting from this since we’re pro America, we’re calling it as we see it. Of all the geographic areas, Asia has seen a smaller impact (hence likely less printing on a relative basis). Also. Manufacturing is likely moving to Asia at a rapid pace since they do not have to deal with social distancing guidelines.
Soul Searching: It will be interesting to see if parents in their 50-60s will understand the circumstances of their children who are now in their 20s. If they don’t, we’ll see more problems within families. For example, assuming that your child can suddenly get a “job” because that is how it worked in the past… Is not a great answer. Instead, intelligent parents will help their kids find a relevant profession: healthcare, technology etc. and allow them to change careers which can take over a year. If the parents are smart enough to realize this, the future is bright for the minority that quickly adapt to the changing careers. Meanwhile… people in their 20s will have a lot of soul searching which usually leads to a large majority turning to vices (drugs, alcohol, sex work etc.).
The Bright Side: The future of technology and healthcare is only going to accelerate. This is great for anyone who is reading this sentence as you can simply invest in technology and healthcare. This should protect your savings (any that you have) over the long-term. In addition, you could also go into these sectors for your working career/profession. A great opportunity.
The Bright Side Part 2: Crazy cost of living numbers likely decline. Unless you’re already rich (your spending is pretty much consistent), the average to above average person is going to see a cost of living decline. Rental payments come down, discretionary spending likely comes down as people learn how to cook and your daily spending activities also decline (more likely to play sports vs. go to a sporting event since they are locked down as well). And. We realize the average person will simply eat a bunch of fast food. Fortunately, readers of this blog know to do the opposite of the masses.
The Bright Side Part 3: Re-prioritize your life. After spending a year in a global pandemic, you’ve likely reassessed what is important to you. You can reduce clutter in your inbox, reduce noise in your messages and increase productivity while claiming to be “at work” on a particular project. Also. During this re-prioritization process you should know with certainty that online income is the way forward and you just got another 6-9 months to figure that one out (June of next year is the earliest things will normalize based on current projections… at best).
With the overview out of the way, we’d like to say Happy Holidays and best of luck in 2021! We will hold a Q&A on December 30 to answer questions related to 2021 adjustments. We’ve found that specific topics are better as it removes redundant questions.
Newer Readers: For those that are unfamiliar with our blog we have three high quality products in order: 1) Efficiency, 2) Triangle Investing and 3) Spending for Maximum Return. In order, you learn how to make a good amount of money (a million liquid within 10 years or so), how to correctly invest it and finally how we’d avoid blowing it all with intelligent spending and PED use to improve quality of life. We hold Q&As 1x a month for purchasers only.