As an investor, part of your job is to predict what the world of tomorrow will look like. But that’s no easy task…
Have you ever heard of the ‘Blade Runner’ curse?
When it was first released in 1982, the ‘Blade Runner’ movie featured a host not-so-subtle advertisements from some of the day’s biggest companies. Over the course of the film, audiences witnessed heavy advertisements from the like of Pan-Am, Atari, Cuisinart and Bell Telephones, all reimagined in a rain-sodden LA of the future.
So where’s the curse?
Well, most of the brands advertised in ‘Blade Runner’ never ended up making it out of the eighties—never mind to 2019.
The Bell System monopoly was broken up in the same year that ‘Blade Runner’ was released. Atari, the leading video game developer at the time, never recovered from the next year’s industry downturn. Cuisinart and Pan American Airlines went bankrupt in 1989 and 1991 respectively.
In fact, it seems as though Coca-Cola was the only company that managed to survive completely intact.
Predicting the Future
Regardless of your superstitious beliefs, this anecdote makes it clear that predicting the future based on today’s market is no easy task.
In the first quarter of 2008, ExxonMobil, PetroChina, and General Electric made up the world’s top-three most valuable companies. 10 years later, none of them are even in the top 10.
You could even argue that the forecasting problem has become exacerbated over the past few years with the rise of so many startups that disrupt the traditional way we do things. Just look at how Uber has demolished the taxi industry and made serious inroads into home delivery.
Who knows what else is to come?
But the real problem with ‘Blade Runner’ was that it only looked at the big companies of the day when they were already big. In imagining the world of the future, it’s more important to look at the companies that are poised to form a vital part of the world of tomorrow.
No amount of business analysis can foresee what is going to be the next big thing, but as consumers, we can look at the bigger trends and use our intuition to try and get ahead of the curve.
Follow the Money, Follow the Millennials
Millennials, the biggest generation in American history, are entering a time in their lives when they will work the most and have the most spending power. This means that understanding how millennials behave can give us a big advantage in identifying a good investment.
Luckily, there’s a wealth of knowledge available about this consumer group that we can tap into for this purpose.
We know, for example, that Millennials favor access over ownership in almost all areas (with the exception of their personal devices). This has given rise to a ‘sharing economy’ of renting rather than buying, especially with convenient subscription services like Spotify and Netflix.
They utilize the internet to acquire consumer knowledge and care greatly about community sentiment with regards to products and service. They’re happy to spend time searching for good deals from various sources, which has led to the rise of online review sites like Yelp, Tripadvisor, and Booking.
Millennials are fiercely loyal when it comes to technology, yet can be incredibly fickle in regards other luxury goods like clothes and cars. They value quality but are also very price conscious.
Health is also a major issue for this generation. To Millennials, however, health means something different to them than it did to their parents. Health to the Baby-Boomers meant not getting sick. Health to Millennials means eating well, exercising regularly, living a well-balanced life—and most importantly—uploading a photo of it all to Instagram.
Millennials are environmentally conscious to a degree, favoring a greener approach to living as long as it doesn’t impact too much on their comfort levels. The company that marries green living with convenience will be a big winner in the sharing economy.
So, using this information, what companies might we expect to do well in the next 20 years?
In terms of food, Millennials are definitely trending towards more healthy alternatives. The move towards fresh organic produce should favor companies like Hain Celestial or Amazon’s Whole Foods Market. Companies like Walmart, who sell mass-produced, processed foods and pay their employees minimum wage, aren’t viewed kindly by the next generation of consumers.
The emphasis on healthy living should also spell good news for athletic apparel companies like Nike, Under Armour, and Lululemon—as well as gyms like Planet Fitness.
From an environmental standpoint, companies like Tesla stand much more to gain than ExxonMobil or GM—provided they can bridge the price gap (and start actually producing Model 3s). This is something that seems to have been accepted by the industry as a whole, however, and we’ve already seen how most major automakers are starting to invest in an electric future.
And then there are there are the tech companies, both big and small, that the Millennial generation has grown up with. Social media apps like Twitter, Facebook, Instagram, WhatsApp, maybe even Tinder. Content streaming sites like Netflix, Hulu, Spotify, and (soon) Disney. Companies that take the pain out of daily tasks, like PayPal, Wix, Teladoc, or Shopify.
Yes, some of these might already be the large companies of today (like Facebook, Disney, Netflix), but it’s not always the startups that disrupt an industry. The real measure to look for is companies with a tangible plan for the future, and a proven track record thus far will also help. As we all know, being on the forefront of a trend won’t save a poorly run business.
Definitively identifying which of these companies will survive the next 25 years is impossible. However, we do know that the world is changing dramatically, and we can match the next global megatrends against our own consumer experience and intuition.
Follow the money, and you’ll find some great opportunities for the long term investor. Looking back to where the money was once, will lead you nowhere.
Rubicoin operates a full disclosure policy. Rubicoin staff may currently hold long positions in some of the companies mentioned in this article.