Need To Be Ahead Of The Curve

Early this year, when Covid 19 epidemic was beginning to cause serious health problems worldwide, shrewd entrepreneurs began to import and markup prices of facemasks. Other shrewd entrepreneurs switched from whatever they were manufacturing to the production of facemasks. In the meantime, prices of basic facemasks shot up, exceeding US$1 each at one time. The overwhelming demand clearly outstripped supply. In its peak, maybe hundreds of thousands of companies went into facemask making worldwide during that period.

Then came the shortage of ventilators and the rush to manufacture them in places like the United States. Even General Motors switched from making cars to the manufacture of ventilators.  Almost everyone at that time thought that going into the production of these crucial items would lead to riches. Those early in the game certainly did make it good during that period. However those who were late to the party did not do as well. Recently, the news came from China that facemask manufacturers were in a bind as prices plunged due to oversupply. Also nobody talks about the shortage of ventilators anymore.

Meanwhile due to the economic impact of the Covid-19 pandemic, central bankers worldwide had been turning on the money tap providing financial aid to those affected.  The effect was the massive printing of money especially by the developed economies. The huge supply of money led to a sharp rise in the price of gold and a drop in the value of the United State dollar. Although the price of gold had stopped climbing recently and the value of the US dollar had risen from its recent low, the future is uncertain.

The point of this post is to highlight the danger of following the crowd. Once a clear trend is underway, it is usually too late to try to ride it. Therefore the smart entrepreneur is one who is ahead of the curve. He or she is the one who invests in a startup in an area before the trend is obvious.

However it is easier said than done. One way is to find the cause of the effect. For instance, when the Covid-19 epidemic struck, the effect was people getting infected through breathing in the virus from infectious persons. Thus the obvious way to prevent this happening would be to wear a face mask. Of course in hindsight, it was clear that the World Health Organization or WHO made a mistake in not encouraging the wearing of facemasks earlier.

Similarly, the enormous amount of aid to their economies by the United States, Europe, Japan and other countries clearly resulted in an unprecedented amount of money being printed. Such a move would lower the value of their currencies. A drop in the value of the US dollar would therefore prompt a rush to a safe haven like gold.

Thus the enlightened entrepreneur  should scan the environment to assess the things that are going to happen or are beginning to take shape. Using the cause and effect tool, one may be able to spot the trend before it happens.