Simon believes every crisis permanently changes the business world. He looks at the impact of the 2001 dotcom bubble and the 2008 financial crisis, and also shares his thoughts about what the coronavirus will mean for retailers, healthcare, and overall employment.
March 24, 2020
There’s no question that the coronavirus is on everyone’s mind right now. Safety and family are the primary concerns, but there are many unanswered questions about how long this will last or how much it will impact the economy.
While things do look pretty bad, there are some signs of optimism beginning to emerge. Bill Gates believes that proper testing and social distancing could get things under control in 2-3 months. Human trials are already underway for coronavirus therapies and vaccines. Some even believe warmer weather will help to contain the spread.
Of course, no one knows with any degree of certainty what will really happen. These are indeed unprecedented times.
But one thing history has taught investors is that crises also tend to create opportunities. When things get the most dire, it forces the business world to make the most significant changes.
2001’s dotcom bubble bursting changed how web-based companies did business. Irrational valuations based solely on traffic and advertising went up in flames, leading companies to pursue more predictable revenue sources. Subscription-based businesses began to take shape online, paving the way for cloud computing and “software as a service”.
2008’s financial crisis changed how financial companies looked at data. Poor internal controls caused an implosion in banking, leading alternative lenders to find ways to avoid bad loans and offer new financial products. “Fintech” companies became incredible investments.
I believe 2020’s coronavirus crisis will go down in history as accelerating a shift to the internet. Anyone who wasn’t previously doing online shopping is likely considering it now, companies will more often encourage employees to work remotely whenever they need, and patients will begin booking lower-cost telehealth appointments to consult with doctors over the internet for less-serious conditions.
Re-establishing consumer confidence will take time, but many stocks are also currently selling at incredible discounts. As investors, we should keep an eye out for developing trends and capitalize on the coming changes.
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