Every profession has been shaken to its core since the COVID-19 outbreak became a global pandemic in March, and stay-at-home guidelines challenged every single business model on the market. For investors, COVID-19 has served as a call to action to throw out the playbook and draw up new strategies founded not on past performance and precedents, but future needs and circumstances.
Modern portfolio theory isn't modern at all, and it hasn't had a "software upgrade" in 50-plus years. In my experience, people's portfolios usually look a lot like their parents' portfolios and their parents' before that. But your everyday life — COVID-19 aside —looks absolutely nothing like your grandparents' life did. You wouldn't be caught dead driving your father's Oldsmobile, so why are you OK investing like your father's outdated portfolio?
That question should resonate even more as we try to collectively adjust to our "new normal" and, to a certain extent, work to predict what society, and therefore the economy, will look like in the future. The indelible mark left on us by this crisis means the future will look starkly different from our recent past. And if you're someone who makes educated guesses with other people's money, whether as a venture capitalist or a wealth advisor, your ability to survive and succeed now relies more than ever on your ability to analyze current conditions to predict future trends. Doing this with some measure of accuracy would enable you to build what one might call a "future-proof portfolio" that embraces the winds of change.
Every Black Swan event exposes weaknesses or strategic gaps that must be filled. One thing the current crisis has proof-sourced is our thesis that technology plays a significant role in our lives and will play an even greater role moving forward. We will see corporations and governments spending billions if not trillions of dollars filling technological gaps for years to come. On the consumer side, the pandemic has forced consumers to seek technology-enabled solutions to assist in everyday tasks.
Tech companies on the public market have proven to be far stronger than other industries ravaged by the pandemic. In the startup world, we see innovation flourishing; so many new startups have been founded over the past months, offering products and services to help the process of adjusting or adapting to the new normal. I believe these companies will become big names in the next decade on the public market or potential acquisition targets.
As a managing director of a venture capital firm, I'm working to identify new investment opportunities in industries that stand up to a potential crisis. Here are some of the technologies/sectors my firm is leaning into and investing in to ensure our investors have exposure to the companies that will be relevant moving forward:
• Robotics: Beyond assembly lines and heavy-duty manufacturing, robotics has not gotten the hype it deserves — until now. With workers facing the threat of a potentially lethal virus on the job, there has been a collective realization that there is immense value in having an alternative to humans to perform mechanical, rote activities efficiently and safely. Since the outbreak began, robots have proved an essential tool for industries far beyond that. Use cases range from helping hospitals and nursing homes continue operating, to art galleries selling pieces via virtual tours and schools hosting commencement ceremonies.
• AI And Big Data: The convergence of artificial intelligence and big data is the most significant development in the ability to capitalize on data and analytics capabilities. Information is crucial for identifying patterns, modifying operations and creating new processes. One particular area of big data I've been bullish on is facial detection. The applications and use cases are many, but recently, its technology has pivoted to serve a post-COVID-19 society. It can be used to determine whether the use of masks, gloves and other forms of protection are working and draw a line between hot spots and the use of personal protective equipment, among other applications.
• Micromobility: Remember when Uber first launched? It seemed nuts to get into a stranger's car, but now it's a key element in most U.S. cities' transportation systems. I believe micromobility by way of electric scooters will be vital in a similar sense. E-scooters provide a convenient and socially isolated alternative to getting from Point A to Point B and could be a go-to mode of transportation, particularly for essential workers, as it minimizes human contact.
• Virtual Reality (VR): In a time when we must be physically distant, staying in touch with our loved ones has been challenging. Virtual reality is a solution. Historically, VR products have been thought of largely as an accessory for gaming and other viewing experiences, but with recent innovations, VR has evolved to become "experiential reality" and can truly mimic the human experience of interacting with other people. As those innovations continue to leverage the ever-reducing prices of computing power, VR will also become more affordable. I've already implemented the technology into our firm's workflow and used it to shake hands with our CIO from 3,000 miles away. I think VR will be vital if traveling to meet a new business prospect or experience a new place poses a health risk or resources are too scarce for in-person travel.
The companies we have historically relied on, both as investors and end users, will not be the companies we call on to carry society forward this next decade. The world has transformed permanently, and the changes are still coming.
Investing is a marathon, not a sprint. Challenge yourself to be in it for the long haul by asking what we will need, want and crave — not next year, but in the next half-century.