One of the most commonly-asked questions of flight attendants when I used to fly in the 60s, 70s, 80s and even the 90s, was “Are we there yet?” The flight crew would look politely at their watches and reply that it would be few more hours before we arrive.
Nobody asks that question anymore because most airlines provide passengers with in-flight data about the location of the plane. With just a click of a button it can even tell us how high and how fast the plane is moving.
Some airline passengers are so captivated by the system that they might even keep it switched on throughout the flight, so they know exactly where they are at every minute of their journey. In other words, accurate and timely information makes us feel safe, even though we have no control of the plane!
By inference, a lack of information can make us feel less secure. Take the pandemic as an example. Where on the path of recovery are we right now? When will this nightmare end? In other words, are we nearly there yet?
I think the answer is that we are nowhere near the end of this health crisis. It will be a long time before things will return to normal, if that is even possible. But that doesn’t mean that our lives will have to come to a standstill.
And as investors, we mustn’t let this virus scare us into bringing everything to an abrupt halt, either. Instead, this is an important time for us to revisit the businesses we invest in with a critical eye to determine which companies can pivot to the new normal.
Without being too disparaging, far too many businesses have just been coasting for far too long on “free money”. Their idea of forecasting and budgeting has been to take last year’s revenue and expenses, multiply them with some nebulous percentages to arrive at a flattering profit figure for the current year.
That won’t work anymore. COVID-19 has imposed a paradigm shift on every business. But which ones will come through the pandemic stronger? Which ones will still be around when the dust settles?
The answer lies in “relevance”. How can a business make itself relevant in the new normal?
In a post-pandemic economy, only the fittest will survive. Call it the law of the jungle. Call it capitalism. Call it zero-based budgeting. Call it whatever you like. But unless a business can demonstrate why it is relevant, then it is unlikely to be around.
We don’t want to be holding shares in those companies when they become irrelevant.
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Disclosure: David Kuo does not own any of the shares mentioned.