A Return to normal?

May, 2020

There is lots of speculation over the longer term impact the whole Covid-19 crises will have on the way we live our lives in the future. Here are some thoughts from Ian on what may or may not change:

As some of you will no doubt recall, I am a great fan of Peter Diamandis and have spent the last few weeks reading his latest book “The Future is Faster Than You Think”. It is a great read for anyone who like me who has an interest in technology and the future shape of things to come. I used to love watching Star Trek when I was a child and do still now love most things Sci Fi orientated. But how much of this is now “fiction” and how much is “reality”?

For some individuals and businesses Covid-19 has enabled them to “press pause” and take a hard look at how they work, play and even run their everyday lives. How many people have over the last few weeks taken part in an online video meeting for the very first time? Having now done it and seen the advantages of this, how many of those people will continue to make use of such technology? How many people will actually prefer to work from home on a permanent basis rather than commute? How many people will decide that they actually quite like the quiet life, the simple things and the lack of stress that not working brings and will decide that perhaps they will bring  their retirement plans forward?

Why is any of this important as far as money is concerned?

Because we may begin to see some fundamental shifts in the take up of technology and the reshaping of the way things are done and this in turn will impact upon businesses and investments in those businesses. Some old fashioned traditional ways of doing business may well die off and some currently very small companies may end up being the next Apple or Microsoft.

It is not a huge leap to conclude that we may see a lot less of:

  • Traditional retail business models
  • Conventional combustion engine cars
  • Huge office blocks with thousands of people working in them
  • Meat consumption
  • International Travel
  • Hard manual work

And we could see a lot more:

  • Electric cars
  • Electronic devices and software
  • Improvements in healthcare and wellbeing (devices and services)
  • Internet shopping
  • Home delivery services
  • Solar and wind power
  • Artificial Intelligence

These changes will not be overnight, but Cobid-19 may well have helped accelerate some of the “new normal”. Businesses that were already struggling with old models will have to quickly adapt or they will fade away. Take up of new technologies may well be much quicker than would have been the case, “necessity is the mother of all invention” and in geo political terms power may shift. As the world gets used to needing less oil, the Middle East will become less important to the West. China will dominate more, the US less so and India, who has a huge, young and very well educated population may well come to dominate the world of business much more, as well as being a significant consumer market (young professionals adopt new technology quickly and are also avid consumers of fashion and luxury brands – median age in India is just 28.1 compared to the UK’s 40.5).

Nothing stays the same forever and it is remarkable sometimes how quickly things can change almost without being noticed. Just look at these businesses which are now enormous companies and household names and the year in which they were established:

  • Amazon – 1994
  • Facebook – 2003
  • Uber – 2008
  • Airbnb – 2007
  • Apple 1976

The first iPhone was only launched in June 2007 and as of December 2019 more than 2.2 billion have been sold. Since 2001 Apple’s share price has increased by 15,000%. Facebook now has 2.41 billion users worldwide and Airbnb is the largest provider of hotel rooms in the world yet does not own a single hotel room or property.

It is important therefore to understand that change is constant and that 20 years’ time could look very different to how it does now. This impacts on investment decisions and how money should be allocated in the longer term. Investing in technology companies alone would be foolhardy and far too risky; yes some money should be allocated to the larger, more proven and profitable businesses, but the key point here is to make sure that investments are kept under review and that amendments be made on a regular and considered basis to not only reflect current economic thinking,  but also the bigger picture changes coming down the line. Just because a business was great and worth investing in 10 years ago does not mean that we should continue to hold it today. The world is changing and probably “faster than you think”.

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