The Ball Game Has Changed

A few days ago, the United States started the Covid-19 mass vaccination program. This came soon after the United Kingdom did the same. And in a few months, people elsewhere are likely to start receiving the Covid-19 vaccinations as well. To many people their hope is that the wearing of face masks and taking temperature for entry to certain premises would soon come to an end. However, while there is cause for optimism, there are many uncertainties. For instance almost half of those in the US surveyed are not keen to take the Covid-19 vaccine. Also Covid-19 could mutate thereby rendering the current vaccines ineffective. What is likely is that the situation would get worse before it gets better in the US.

One significant lesson to be learnt from the Covid-19 pandemic is that change can come in an instant. Most changes tend to be gradual. Take climate change for instance. The rise in global temperatures had been happening over the last few decades. However its effect had been becoming increasingly more devastating as evident by fires, droughts, floods, rise in sea levels and many others. Perhaps Covid-19 was like climate change in that it had been around for a while but not that infectious. Then it reached a critical stage when infections exploded in Wuhan, China early this year. It is possible that climate change could result in such an explosive moment for governments to take action like Covid-19.

Another siesmic change lurking over the horizon is the aging population. In Japan, the number of older workers retiring already exceeded the entry of new young workers entering the workforce. for a decade or so. Many Asian and European countries are following in the footsteps of Japan. One significant change is that those retiring almost entirely stopped buying things they needed for work like shoes and apparels. They also significantly slowed purchases of household items like TVs, audio equipment etc. Younger workers who make such purchases are too few to offset the decline. As a result, demand for many items dropped. This is also the reason why inflation is so low over the past 2 decades and is unlike to increase so long as this trend continues.

In the past, startups go for areas where demand is high or growing. There will still be areas of high demand or growth but they are in the minority. However, for the vast majority of businesses and companies, the era of rapid growth is behind us. The question is whether startups can invest in areas which are declining. The answer is yes, but the strategy must be at the expense of existing players. For instance, startups selling products online have been causing closures of brick and mortar stores. In the past, startups take a slice of an ever increasing pie. Today, the pie is shrinking and startups have to take a slice of the pie which had been someone’s else previously. Yes, the ball game has changed.

The way to do this is for startups to be much more productive than existing players. They can achieve this by finding ways to lower costs. Those selling online save considerably on rental of premises for their business. Startups could also employ people who work from home thereby saving rental costs for office space. However it should be noted that the cost savings have to be significant to be viable. In this respect, a 10 percent savings in space requirements would not be considered significant.

Entrepreneurs contemplating a startup today should also consider areas in which some term the sunset industries. In time to come, many industries would be like the tobacco mnanufacturers with sales on a downtrend. However the tobacco manufacturers are still thriving even after decades of reduced sales. Now that is food for thought.