The Gradually Suddenly
CV19 and the future
We find ourselves at a time of unprecedented consequence. We have little doubt that the changes will mark us forever. Tim O’Reilly reminds us[1] of Hemingway’s words in the Sun Also Rises, when the war veteran Mike Campbell is asked how he went bankrupt, and he replies, “Two ways,”. “Gradually, then suddenly.” This is exactly how we feel about the change that will rush from the various environmental and social challenges that face us — the effects are gradual, then sudden. This is no different. CV19 is the negative externality of the gradually accrued unfunded liability from globalisation and unkept healthcare systems. And the bill is demanded all in one go, most suddenly, to the tragic tune of many lives, and trillions of dollars.
As we look forward, we find ourselves contemplating the consequence of ‘gradually suddenly’. Whilst we have seen a number of negative consequences on many businesses, and society as a whole, this Crisis has only hardened our resolve and our conviction around the thematic focus of what we do — we will continue to invest in innovative early-stage technology companies seeking to solve global social and environmental challenges.
The chief effect of CV19 is a winnowing effect — it brings into sharp contrast what really matters. It is no doubt deflationary, in so far that our confidence in the future is diminished — and as such, we postpone, or perhaps permanently cancel consumption decisions. We only consume what we really need. Everything becomes more essential. We have often been asked how ‘impact’ fares in a downcycle — ‘‘it’s the luxury of a buoyant market to worry about the ills of the world.’ That is one perspective, but it fails to acknowledge and understand the critical imperative of impact, borne out most recently. Aside from the obvious moral imperative, it is our thesis that social and environmental impact is anything but a luxury, but in fact core to a resilient investment philosophy.
We have seen the tailwind impact of ‘gradually suddenly’ in a number of our ventures, due to unprecedented behaviour change. Trends that were forecasted to change over the next 10 years are changing in months. Student Finance seeks to help finance education for vocational programmes in technology, critical in the current environment where large parts of the global workforce need to be retrained towards this new technological reality. Knok is a Porto-based telemedicine platform that is now growing exponentially. Platypus is a Copenhagen-based firm that tracks company culture. Good Club is an online ethical food platform, growing over 30% monthly. All the above are part of solving social challenges around natural capital adequacy, health and culture, and that their importance is ever more apparent today.
From a thematic search perspective, we don’t think that things will be different. They are just happening faster. We are not planning to look for the next big trend, but rather find ventures that exist within trends that were already unfolding in a meaningful, gradual way, but now most suddenly.
Essential human interaction
The winnowing effect of CV19 is perhaps most manifest in human interaction. Interactions that are of little pleasure or consequence, are easily deferred to online interaction — shopping for groceries, for example. Brick and mortar supermarkets are rightfully quaking in their boots, as their future is most positively questioned. Going to the supermarket is, for the most part, a chore. We can now do it online. Open-air food markets, on the other hand, are a joy, and we expect them to flourish. Equally, going to hospital triage for a cold or fever, is unpleasant — and so yes, we expect that to be neatly usurped by telemedicine.
And so the question is, where is human interaction most superfluous and unenjoyable, but still overwhelmingly ‘offline’? Well, to name a few — grocery shopping, triage at hospitals, call-centre work, taking your rubbish to the bins, walking your dog (every day), PA work, stock management, managing utility bills, visiting your social security centre. CV19 has brought this lens into sharp contrast in healthcare — pre CV19 less than 1% of primary care was online. Post CV19 how much might this grow — 5x, 10x, 20x? Look for online delivery at hospitals in the fields of testing, diagnosis, AI, anything that means people don’t have to take up the time of primary care professional before they really need it.
And so the likely lens for finding success is filtering for interactions in which technology facilitates non-essential and relatively unpleasant human interaction, and conversely, the technology that enables pleasurable offline human interaction — such as dating, building networks amongst college friends, attending your child’s important school events, spending more time with your better half, spending time with your parents, spending time with your best friend.
Picks and shovels
On the topic of essential and pleasurable human interaction, the strongest commercial networks tend to be forged on campus, at university. There is a good reason that every PM in Britain has come from either Oxford or Cambridge, and there is an equally good reason that Facebook was founded at Harvard. While depressing from a diversity perspective, this is the reality of networks — their value to the individual user resides in their density (proximity of nodes, and the number of connected nodes) and, most importantly, scarcity of access. Ironically, this is perhaps the ultimate mistruth about Facebook. The network tool offered by Facebook is abundantly accessible, and therefore of questionable value to the user. The economic value all accrues to the network owner, the Havard founder. The development of strong, meaningful, personal relationships is as important as ever. Which tools help us do this?
This crisis forces us to ask more fundamental questions about where the value of campus education truly resides. Is it content? No. Most schools and universities use the same textbooks. Is it network? Yes. Is it brand? Yes. Do low/mid-tier campus universities cease to have real, non-substitutable value? Probably.
We expect to see an acceleration of unbundling in various areas, especially in education, whereby specific value is allocated towards content, network and brand. When a student attends a top-tier university and pays the best part of $200,000 in tuition fees, what value is ascribed across content, network and brand? No doubt brand is key — we part with a lot of money for a badge that can be shown to future employers. This unbundling will change higher education, in that institutions will need to think hard about where their relative value lies. The top universities will be faced with a choice — how best to monetise that brand, and how best to share their content. Great restaurants are judged by their food, ambience, clientele, but the proof is often in the pudding. For university students, pudding is a job. Did you get a great job? Can you pay down your student debt. It is revealing that almost 10% of the $1.5 trillion in US student debt is delinquent — unbundling is perhaps long overdue.
We would expect some top universities to offer online degrees — cheaper — and partner with tech companies to deliver these courses. The gold ‘mines’ are the top universities, and the ‘picks and shovels’ for those mines are some smaller tech companies. Professor Galloway at NY Stern University wrote an excellent piece of prose[2] from which we shamelessly plagiarise his thoughts here — but the ‘pick and shovel’ lens towards venture for education, and beyond, is illuminating. The stigma of homeschooling is diminished, and the technology tools are ever more important. See Blackboard.
The issue with picks and shovels for impact is that they are often what we would describe in the world of impact as ‘non-directional’. Picks and shovels can be used for many different outcomes — some, such as making better education content available to more people, is a positive vector for impact. But others will be decidedly negative, such as encouraging more screen time for children and less human interaction.
The Milky Way
We conclude by turning our gaze towards the constellation of picks and shovels that aid in delivering pleasurable, network-driven, essential human interaction, and also those picks and shovels that aid in diminishing human time spent on the converse. No doubt this is all easier said than done, and the truth is that whilst we form logical narratives about our vision for the future, we have no idea. We write from IKEA-decorated homes, hurtling through space at over 100,000 km/h (simultaneously spinning on the Earth’s axis at the speed of sound), at some insignificant dot in the Milky Way, amongst another 100 billion galaxies in the Universe.
We don't know what this current crisis will bring, but we are quite sure that Gradually Suddenly will be paying us further visits within our lifetimes, and the onus is on us all to work with great energy and humility towards a loving and peaceful world.
