For Sound Investing Post-Corona…Listen to Snoop

By James Cakmak and Ryan Guttridge

Snoop Dogg has it figured out.

In his latest Corona commercial, he states: “If it’s true that time is money, don’t you think the real question is how you should spend it? “Keep the change baby, find the fine life”. Intentionally or not, this is sound investment advice for the post-Corona world.

Before the internet, life and ambitions largely were defined by the following structure. You grew up, went to school, completed some level of education, worked the 9-to-5 until retirement, and finished your remaining years living off your savings.

In the last ten years, not only has the internet (powered by mobile) shrunk the world by making us all connected, but it also increased the speed of change while simultaneously degrading the 9-to-5 structure. Everyone was on the treadmill holding their breath until Friday or on the edge Sunday night hoping not to miss the “fire drill” email.

Arguably, most of society didn’t realize how askew this balance was until Covid. The limitations on time were transformed from deficit to surplus. No more commutes, shopping, running to the bank, or business travel. Just turn on your computer/phone and go, everything’s a click away.

As a result, we have more control over our time (and consequently responsibility) than ever before. The “finer life” is now predicated on better work-life balance.

End of the 9-to-5 and its Consequences

Technology’s essential purpose is to save time. As it evolves, new vistas of time emerge. Most of this is gradual, incrementally changing our behavior and culture virtually without notice. Do you remember when you became so addicted to your smartphone? It likely happened without you realizing and next thing you knew you couldn’t leave the house without it.

In fact, the rate of change is only accelerating. For example, to reach equivalent penetration of US households, it took the telephone about 50 years, color television 30 years, and Facebook only 10 years. Zoom, meanwhile, doubled its business in a matter of months (with positive free cash flow!) and also made its way into the lexicon. It’s no longer a call, but a Zoom call.

Once in a while, sudden tectonic shifts occur, transforming our lives in a blink of an eye. In physical systems, changes of this magnitude are known as “phase changes”, as solid shifts suddenly to liquid.

Post-Covid, un-structure is the norm as we have gone from “rigid” to “fluid”. This was inevitable, but it has been massively accelerated by the pandemic. While having more time has great benefits, it comes at a cost…a lot more responsibility. Worse, rather than getting acclimated, we have been thrown into the water and are being forced to learn to swim.

The benefits accrue in many forms, such as the flexibility to work from the beach. The challenge is that you’re now forced to become your own brand rather than an individual representing the corporate brand. Hard skills are increasingly evaluated in lieu of soft skills when the boss can’t see you. Moreover, you’re often left to promote your skillset online for attention and opportunities. In other words, you have more time, but it’s all on you. You no longer get credit for just sitting behind your desk until everyone leaves and there is no reward for just showing up on time. The paradigm shift is palpable.

Marx talked a lot about a society without the boundaries of classes, but he didn’t spend much time on its consequences. Swimming by yourself in a sea of options isn’t as easy as it sounds. The cultural divide is understandable. Despite differences, there is consensus in the advocacy for solutions to the uncertainty.

Adapt, Invest, and Thrive

From an investment point of view, it isn’t hard to see how this plays out. Sure, there’s concerns over inflation, but technology always pushes forward.

Companies that help us manage this distributed world will be the winners.

The days where geography matters to run a business or to be a brand are behind us. Companies that approach society through this lens in helping businesses or individuals deal with this uncertainty will flourish. However, the ones that cling to the old paradigm or try to preserve legacy assets are bound to fade into history.

So far, we have separated these enablers into four separate sectors:

1. Physical Infrastructure Providers
2. Social Infrastructure Providers
3. Brand Builders
4. Data Synthesizers

Let’s drill down on each.

Physical Infrastructure Provider

Companies that provide the basics of running a business and operational continuity.

Notable companies include: Amazon (AMZN), Apple (APPL), Crowdstrike (CRWD), Nvidia (NVDA), Verizon (VZ).

These include cloud providers, cybersecurity, communications, and the semiconductor industry.

Social Infrastructure

Companies that save you time “socially” and benefit from scale with network growth.

Notable companies include: Airbnb (ABNB), Discord (pre-IPO), Netflix (NFLX), Roblox (RBLX), Uber (UBER).

Lots of companies will grow around this opportunity. Generally speaking, social infrastructure providers are companies that help facilitate transactions, connect network participants, and leverage scale to enhance service capabilities. We see this area to be potentially the source of multiple new S&P sectors.

Brand Builders

Companies that minimize the onus of brand building from corporate to the individual.

Notable companies include: Alphabet (GOOGL), Facebook (FB), Shopify (SHOP), Snap (SNAP), Spotify (SPOT).

Brand builders enable users to achieve scaled distribution by utilizing targeting capabilities fueled by network participants. As their networks grow, so do the strength between connections.

Data Synthesizers

Companies that make sense of data.

Notable companies include: C3.ai (AI), Roku (ROKU), Snowflake (SNOW), Square (SQ), Tesla (TSLA).

Data synthesizers work in two directions. On the one hand they help businesses make sense of data; on the other, they process data from users and either improve services or carve out new categories. An example is Tesla using data to make autonomous driving safe.

New Vistas of Investment

The thing about technology that’s underappreciated is that culture follows technology, not the other way around. Said another way, technology comes first, culture second. What happened during Covid is that technology moved leaps and bounds faster than our previously structured society was ready for. It all just happened way too fast. There’s a reason why 60% of people feel uneasy today. This shift from a rigid to fluid society opens up new vistas for investment. Being on the right side of the curve can pay dividends as culture catches up and converges with current technology.

Meanwhile, from an investing perspective, remember that it was Henry Ford’s assembly line that gave birth to the consumer led economy and the subsequent rise to entirely new sectors. So ask yourself not how will the stock market move higher, but what sectors will lead the way over the next ten years and what companies will help consumers “find the fine life.”

Clockwise Capital is an asset management firm with a private equity approach to the public markets. We focus on the meaning of time and the role it plays in people’s lives. We believe the essence of a great investment resides in the ability of a company to either save their customers time, or improve its quality. We understand how technology evolves to drive these two factors, which we believe define human progress. As a result, we search for securities with cyclically depressed valuations whose companies save time, thus using secularly advantaged industries to build a concentrated portfolio. With each series of investments our goal is to optimize edge, maximize return, while also minimizing correlation. This allows our portfolio to maintain a liquid, low duration fixed income balance, ready to capitalize on market volatility, while still generating market beating performance.