The pandemic has shown the world that the vast majority are unable to make solid long-term decisions. This ranges from the purchases they are making today to the purchases they made prior to the pandemic. Quite interesting to watch as the same mistakes occur year after year after year. The good news? You don’t have to worry about a sudden change in human behavior. They will always make the same mistakes. So. You can sell products that are evergreen (weight loss pills, fast track to riches seminars etc.).
Instead of covering the best sectors to sell to (which we have done numerous times in the past), we’re going to focus on how to make smarter long-term decisions. For successful people this will seem incredibly obvious. For those that are currently making bad long-term decisions they will stand out like eyesores when you go back and check your spending.
Time Comes First: Before jumping into each specific segment, we have to look at the time factor. The items you can attend to will vary based on your current constraints. If you had to travel a lot for work, having a pet dog would be incredibly foolish as the dog would live a terrible life and you wouldn’t even be able to spend time with your best friend. Also… If your time can be spent at home, it would be unwise to invest in entertainment options that require a lot of travel (say season tickets to a sports team if it’s over 1 hour away – a more common example would be the season pass to an amusement park). Any time you make a decision you have to look out 2-3 years and see if it makes a difference. Many times it will.
The second big one is the *wasted* time, or opportunity cost. This one is also common. If you’re only worth $1M liquid and you can choose between a 10% extra return or starting a business that generates $100K+ extra per year for life… it isn’t even close. You’re better off just buying diversified items and building up that mini dream of yours. On the other side of the spectrum is quick decision making. If you’re wasting time deciding what to eat, you’ve already lost. Just go with the healthiest option and if they are both healthy, go with the closer/faster one. If they are all equal then just flip a coin and move on.
The third and final one is “time risk”. If you sink your time into something, ask what the upside and downside of the decision is. If your friend asks you to eat dinner at some new restaurant, just say yes as the downside of having some food you dislike is pretty much nothing. If your same friend asks you to get blacked out for a weekend it might not be worth it (exceptions of course include a bachelor party or some sort of real celebration – sold a business/got a promotion etc.). Overall, these three types of time risk sound similar but look different depending on the time frame. So for this section we’ll look at bigger long-term decisions that are critical to making your life easier.
Home Ownership: First of all, congrats to everyone who liquidated their real estate holdings in December of 2019. Talk about incredible timing. That aside, we’ve watched as homeowners make awful decisions during this pandemic (despite knowing they won’t be stuck there for longer than 3-6 months). Here are a few examples: 1) trying to build a garden when they won’t be able to maintain it after the lock down, 2) purchasing a pet when they also won’t be able to take care of it in the future and 3) attempting to fix real construction work without the necessary skills creating additional costs in the future.
You’d think these bad ideas would be obvious, but they are not. People are lazy. All a person has to do is google search the type of trees/bushes/flowers that grow in their climate before making a purchasing decision. And? They don’t. If you decide to do landscaping, you don’t even need serious knowledge in horticulture. It is perfectly fine to upgrade your home… But why would you create something that will die soon? It doesn’t make sense. Instead look at around, do some basic research and figure out which types of plants will do well. This will make your activity a lot more productive and when you’re back to normal living, the hard work will not be wasted.
The second one is simply terrible. Adopting pets is fantastic… Not being able to take care of them is just cruel. Pets are popular in US culture as they are loyal to their owners even if they go from living in a large home to a small one. There is no standard needed, except food, water and the absence of abuse (neglect/hitting). We’re hoping the ramp up in adoption is being met by an understanding of a 10-15 year commitment to keeping the animals in a good physical state as well. (Don’t forget the pet-sitter when you’re on vacation!)
Finally, the third one is the big money drain. While losing a few bucks due to poor planting is one thing, messing up major construction work is another. If you don’t have the necessary skills to fix a kitchen… Don’t fix the kitchen. While it sounds like a good idea, if you incorrectly rip up a floor or a wall, this will result in paying for an entire remodel again. Generally speaking, clean up work is fine and alterations are not. This would push you towards outside yard work where chopping down a dead tree or taking out weeds is not going to go “terribly wrong”.
Fitness Equipment: This one is quite interesting. Most fitness equipment goes unused. People buy it and never use it. So in that case you’re better off just having a set of dumbbells as they are versatile enough to hit all major body parts. Beyond this you have to start thinking about long-term repercussions of the purchases. Beyond dumbbells it seems that there are really three options. You buy an aerobic item (like a bike), you buy a real barbell + rack or you go all out and get both & a Tonal (or something similar).
Why do we break it out like this? It makes you decide on what path you’re going down. If you’re just looking to keep your gains/physique, heavy dumbbells will be enough. If you’re looking to get rid of your gym membership then you’re looking at the full set. If you’re trying to reduce transit time and have weather issues in your area (a cardio/heavy weight session available is helpful).
While sales of fitness equipment is up, we’re guessing that the majority have only gone down the dumbbell path. It just isn’t easy to make these longer term decisions (even though you should!). You’ve got more than enough time to set it all up. So instead of blind buying the dumbbells take a look at all the options and decide how long it would take to “pay it back”. If you would have spent $1,200 a year for a high quality gym membership (but a year is dead now), this ROI becomes pretty interesting.
Clothing or Software Entertainment: This is probably the craziest one. If you’re looking to maximize your quarantine it would make way more sense to buy clothing at a discount. Right now retailers have massive inventory and demand is at rock bottom. You can now purchase enough clothing for the next couple of years as long as you wrap them intelligently. Why would people spend money on a new video game machine that will be outdated within a year (they are selling at a premium).
As a note, we’re not surprised by this, just entertained by it. Video games and Netflix will be in higher demand when compared to shoes/clothing despite the latter being a smarter long-term decision. If you play sports you can pick up a couple years worth of gear for the price of a single year of spending. They will not “disintegrate” if you simply keep them sealed (extreme levels of caution can be taken by plastic wrap and in a cooler environment).
For fun, we looked at the current prices for shoes/shirts/suits/ties/pants etc… they are all incredibly low! You can buy them for 50% off or more in many many many cases. This is an obvious purchase as you’re not going to wear the same clothes for the next 5-10 years. It just doesn’t make sense. That video game selling at retail price (or higher) will be out of date by then and you didn’t get a bargain at all.
The most interesting thing here is that if you followed the pandemic preparation (something we outlined a couple months ago) all those goods are now expensive. From paper goods to toothpaste and medical supplies. It doesn’t make any sense as they are unlikely being used in mass quantities. That said, it’s not surprising so be smart and do the opposite (look at clothing, electronics that are not software/downloads and travel gear such as suitcases and backpacks).
The income Side: Ah yes it wouldn’t be a long-term post without the more important item covered: Income. If you have a diversified income stream (minimum of 3 or so), at least one should be up 100% this year. For people with exposure to internet based income, it’s up at least 100% and maybe 500% in certain extreme circumstances.
Unfortunately, everyone is late to the party and will now try to jump on the bandwagon. Instead of making a dumb decision people should do two different things to profit off the downturn. It is incredibly simple actually: attach low cost items to your current sales (even if brick and mortar) and trade time for money if absolutely bored with nothing else to do.
Since people cannot think for themselves we’ll use two blatant examples. If you run a restaurant you should have an offering for *pick up* of food where you’ll give each customer a free roll of toilet paper. A few companies have done this with enormous success and we’re absolutely shocked no one else has done this. It helps you maintain revenue and you already have this in your establishment. No one is going to be using it if they don’t show up… So you’re making the same amount. Also. An alternative is to offer a free small bottle of cleaning alcohol. This is also extremely cheap and easy to procure, Isopropyl Alcohol can be put into a small 5oz container in less than five seconds at practically no cost.
If you are just sitting at home doing nothing? Time to learn basic sewing. Please do not tell us this is difficult. It takes a few minutes. Simply buy items that people will want to wear (sports teams, memes, nice coloring etc.). They don’t need to be N-95 masks, they just need to function and look decent. You can now sell this online.
What is the point here? Pretty simple, you want a long-term outcome and a short term outcome. Trading time for money is typically a short term outcome, and the long-term item of attachments creates a larger customer base. When the economy opens back up, you’re in business still and you’ve reached more people while everyone else stood in place relying on Uber Eats (hurting margins and offering no differentiated experience).
Think Three Steps Ahead: A good framework here is to mitigate risk and think three steps ahead. Back before the pandemic started you should have found a way to stock up on non-perishable goods at a normal cost. Buying in bulk made sure you didn’t waste/lose money. Now that we’re in the pandemic period you want to think about what will be useful in 18-24 months. A new travel bag and clothing will certainly last that long if they are taken care of.
Another good way to make faster decision that are smart (long or short term) is to ask “what potential damage will occur if i’m wrong”. Eating a bad meal by trying something new = no time lost just a small annoyance. Buying $500 worth of plants that aren’t meant for the soil = wasted several hours and lost $500. Buying a new video game at 100% premium to hang out with other people who are wasting time? You could have bought something useful that lasts 3-5 years like a suitcase. So on and so forth. In short, ask “what time do i gain or lose by doing this” and all your decisions will become 100x easier.
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. We hold Q&As 1-2x a month for purchasers only.
Our Next Q&A is May 1.