2030 Vision
With the year winding down, we took time out this past week to read and think. One of the concepts we stopped to ponder about was how our day-to-day lives have changed in the last decade. This reflection also got us wondering how our day-to-day lives might change over the next decade. Now, when we talk through this, we are reflecting on our day-to-day lives, not necessarily thinking about, say, advances in medicine. Further, we’re trying to explore lesser-discussed topics, unlike self-driving cars, cryptocurrency, or 5G as these are topics on which we have little to add.
But before we get into how we think our lives may change, let’s take a second to explore how our lives have changed. We worked through this topic by thinking through a typical day in our lives in 2010, and then comparing that to how we do things today. We came up with the following:
Platform shift: in 2010 we were still very happily using our BlackBerrys (hey, don’t laugh!) and thought we were special because of the ‘exclusivity’ that BlackBerry Messenger provided. That platform however was very quickly replaced by iOS and Android which were far more flexible, open, powerful, and frankly, installed on better made devices (with better interfaces).
Web-based to app-based: The platform shift allowed for a lot of day-to-day execution to shift from the browser to the mobile phone through apps. In 2010 we did most of our booking, food ordering, shopping, social media, etc. on the browser (does anybody still use Firefox?). We do all of this now predominantly by using the mobile phone. This shift has allowed for almost instant engagement as we have access to all these services no matter where we are (as long as we have data/wifi).
Mobile first: The rise of the smartphone allowed for the creation of ride-hailing apps, and say what you may about their business models, no one can doubt the impact they have had on our day-to-day lives. The funny thing is, they couldn’t have existed before this last decade as the base infrastructure (the phone and mapping capability) also didn’t exist.
Streaming over purchasing: This is not just a technology shift, but a consumption shift as well. In 2010 we still had to ‘borrow’ movies, illegally downloading music was still very common, and so was paying large sums upfront for games. That model has fundamentally transformed to a subscription/freemium based model, with on-demand, and unlimited-use characteristics. This change was the definition of a double-edged sword as it led to the death of the linear TV and the movie-rental businesses, a potential death of the cinema business, but a return to revenue growth for the music industry, and an explosion in gaming (especially mobile gaming).
The death of traditional phone calling: Not only have we seen an aversion to phone calling especially with younger generations, but it’s very rare to make a phone call using a phone number anymore. We mostly communicate through free services (Whatsapp, Facetime, etc) , and now do long-distance communication with family over Zoom. We recall obsessing over how many minutes were in our mobile plan, but quickly transitioned to caring far more about how much data our plans allowed for.
From reading to listening: We consume information in several ways but one thing we’ve noticed is a shift from reading (magazines, books, etc) to listening (podcasts, audiobooks, etc). This shift is very age dependent however, as only 8% of those above 65 have listened to an audiobook whereas more than a quarter of 30-49 year olds have[1]. Regardless, this shift allows for much more consumption of media as we can now multi-task. For example, you can’t really read a book while walking to the grocery store, but you can listen to a podcast while doing so.
If we think through the common threads that link these shifts in our lives, a few similarities pop-up: convenience, efficiency, flexibility, better user experiences, and all things being equal, a lower cost. If you consider each of these trends they seems to fit one (or more) of the above benefits. The platform shift was due to greater flexibility and a better user experience, web-based to mobile was due to efficiency and convenience (you always have your phone on you), reading to listening is arguably a better user experience, potentially cheaper, and definitely a more efficient process. With this in mind, we started reflecting on what could change over the next ten years in our day-to-day lives, and came up with the below.
Credit costs shift from buyer to seller (flexibility, lower cost): The last few years have seen a shift from credit to debit as the younger generations shun credit cards. That said, it’s not that these consumers don’t want credit, they just don’t want to pay for it. Thus, we’re starting to see innovative models (like buy-now-pay-later) where the cost of credit is actually put on the seller, not the buyer. Previously, we had seen sellers extend costly credit but the concept was more “I’ll lend to you so you can buy from me” rather than the now, “I’ll lend to you so you can buy more from me.” By bearing the cost of credit, sellers have actually seen consumer repeat purchase and basket sizes skyrocket. This shift reminds us a lot of how banking first started (in Babylonia)[2]. Initially, banks used to charge for making deposits (i.e. you had to pay for security), but they quickly realized if they paid customers for that, customers would give them more of their savings, and the banks would make a lot more money elsewhere (i.e. by lending it out). It’s the same with merchants now; they will absorb the extra 3-6% charged by BNPL providers as they will make much more money from the increase in purchases. This shift, however, is bad for the credit card issues who make money on both ends (from the merchant and from the buyer), and will, just as the ancient banks did, likely see one end of that business model (i.e. interest charged to the buyer) disappear.
Purchases initiated by discovery rather than search (better user experience): Last year we were talking to a friend who used to be a product manager for a leading travel website. When we asked about how his former employer’s business was progressing, he mentioned that GenZ/Millennials were ‘ruining’ the business as they didn’t want to go to places that were heavily reviewed, as that implied the experience was no longer unique. This tendency to want unique experiences is further exemplified by the rise of businesses like AirBnB and Redbubble. As Andrew Rosenblum of Bonsai Partners, who were early investors in Redbubble, asked in a recent conversation (paraphrasing) “Do you think the market for unique experiences is going to get bigger or smaller going forward?” – the answer is clearly bigger. This makes us think that the desire for unique experiences and items will also drive purchase through discovery rather than search. Consumers going forward, will want to express their individuality and will look for cues from influencers rather than brands that mass-produce items. This implies that the strength of social networks such as Instagram and TikTok are only going to get deeper, to the detriment of say, Google.
Out-person instead of in-person (efficiency, cost): We don’t have to say much to defend the notion that holding meetings, consultations, etc., over video conferencing can be much more efficient that in-person interactions, especially after the year we just had. We think one area where this will be especially true is in medicine. We’re not talking about major surgeries/procedures just yet, but more about a visit to your GP. If you think about it, a visit to your GP (or even a first meeting with a specialist) is a very annoying experience. You have to book a time (sometimes it’s hard to get an appointment), travel to the clinic/hospital, frequently wait for over an hour, all only to meet the physician for just a few minutes. It’s a terrible user experience that should be eliminated, and should be replaced by telehealth solutions. Many people, ourselves included, experienced telehealth for the first time during lockdown, and found that a typical visit to the doctor which would take 1.5-2 hours of our time was cut down to a simple 10 minutes. Not only that, but it was much cheaper too. We think going forward 10 years, we’re going to find that most initial visits to the doctor will likely be done remotely, unless there’s a case of an emergency.
Prepaid rather than post-paid (efficiency, lower cost): This podcast featuring Nick Kokonas, who founded the 3 Michelin starred Alinea, got us thinking a lot about how restaurants going forward will need to change their business models. Alinea has a unique business model where they sell ‘tickets’ for their pre-fixe menu and prices differ depending on when you visit (i.e. a Monday night will be cheaper than a Saturday night). Those tickets must be bought in advance, which gives Alinea millions of dollars of upfront cashflow every year (they’re booked up much in advance). Imagine if every restaurant in the world could have somehow implemented this pre-covid. We would think far fewer would have shutdown. Now you might think upfront payments are only beneficial to the business, but the concept is also beneficial to the consumer. First off, it’s not at all a unique thing to do. We pre-pay for flights and concerts all the time. The benefit is knowing that we will get entry/access, we can pre-assign our seats, and with regards to flights, pre-book our food. Because of these benefits we’re happy to pay upfront. In the restaurant world, pre-booking a meal allows you to spend less time looking over a menu at the restaurant, giving you more time with your companions. Further, if restaurants are earning cashflow upfront, they in turn can pay their suppliers upfront, which will lower the cost of goods, and in turn lower menu prices for customers. It’s a potential win-win. Now, we’re not suggesting that ALL restaurants implement this, we don’t see ourselves prepaying for a McDonalds meal (although we do see a world where more QSRs launch loyalty programs a la Starbucks). However, a certain segment of the restaurant world could and should do this. This concept is not just limited to restaurants, we should start getting used to, where possible, prepaying for consumption in return for deep discounts and efficiency. The pandemic has re-enforced the benefits of a big cash balance, and businesses should be willing to give large discounts to obtain it.
The Death of Radio (better user experience): This is a bodacious claim, but we’re still in awe of how pervasive radio still is in our lives. In the US, audio still has a 90%+ penetration and even closer to home (in Singapore), radio remains popular with 88% of the population tuning in each week.[3] Not even smartphone penetration is this high. What makes this shocking is that radio has lots of similarities with linear TV (scheduled programming, limited choice, majority of content not used by a given consumer etc.). One of the key reasons for the strength in radio is that it is still listened to while driving, and actually 60-80% of radio consumption happens in the vehicle. However, if we’re right about a few things above (i.e. out-person over in-person), more working from home, etc. as a society we’re likely to spend less time in cars. Further, one advantage that radio has is that it comes installed in all vehicles, and operating it is a click of a button (in fact for many models, the radio turns on as you turn on the car). That said, as cars get smarter and immediately connect to the phone rather than the radio, and as content moves to streaming services, we should see a shift from radio to streaming, and free services (like Spotify) should benefit.
While we’ll keep track of each of these trends, and constantly try to re-validate, many of our investments have been made bearing the above changes in mind (cognitive bias anyone?!). The changes in the last decade certainly made our present lives better, so regardless of how these predictions pan-out we’re very excited for the future.
Thanks for reading, and as usual, happy investing (and happy new year!).
[1] https://www.statista.com/statistics/299804/audiobook-listening-population-in-the-us-by-age-group/#:~:text=A%20survey%20held%20in%20early,30%20and%2049%20years%20old.
[2] https://en.wikipedia.org/wiki/History_of_banking#Rome
[3]https://www.nielsen.com/wp-content/uploads/sites/3/2019/06/audio-today-2019.pdf
http://www.asiaradiotoday.com/news/radio-remains-key-media-channel-singapore-nielsen-survey