A year has come and (almost) gone. What have I learned, and re-learned, this year, in terms of investing, running a business and life?
Also, what do I think could be in store in 2021?
Below are 25 things that I have learned in 2020. In some cases, I have just became more sure about these things during the year.
In other cases, I have changed my mind on things, or at least adjusted my positions.
- Controlling your emotions is the key in investing and business. I always preached this one online. 2020 has been a great example of this. So many people thought “this time is different” after the coronavirus and lockdowns. US Stock Markets have risen 80% from their worst point and are up about 20% for the year. Emerging markets are up by a similar amount.
- It is hard to teach an old dog new tricks –It is even harder to teach previously successful old dogs new tricks. Often such people struggle to adapt to new norms and can’t humble themselves. Therefore, it can be better in certain situations to hire people with less experience in business, or at least in your specific industry, and train them up. I have also increasingly learned the importance of employing pragmatic people rather than idealists. Pragmatic people give others what they want, even if they themselves don’t like the solution. I told the story in 2019 of the vastly successful alcohol salesman and now executive I knew who doesn’t like the taste of alcohol! In comparison, some people would rather be moralistic, idealistic and broke than gain traction. People who were “previously successful dogs” are more likely to be like this due to pride.
3. Most people don’t learn –following on from the second point, it isn’t always easy for people to admit they are wrong.
The same people who believed that stock markets would crash in 2016 if Trump got elected didn’t want to invest in 2020……….because they were worried about a stock market crash due to the election!
I am sure the same people will do the same thing in 2024 – third time lucky?
4. The media causes a lot of problems –one of the reasons people didn’t want to invest before the election was the media. For months, they had been saying that stocks would rise if a vaccine was found, and that as markets don’t like uncertainty, they would fall on a disputed US Election.
Fast-forward to November and global stock markets soared despite a second European lockdown and a disputed US Election.
That doesn’t mean the media are always wrong – they got the second part right that the vaccine would help markets. Merely, for every right prediction they make, they get at least another one wrong.
The quote below sums up the media industry:
5. Technology is here to stay – This one is obvious. But there is another trend that the media often don’t report. Namely, many people now don’t want any big human interaction.
So, even though Zoom and Teams has skyrocketed and most people prefer using such tools compared to face-to-face communication, many people just want to do all business by email or WhatsApp messages.
When you last went through airport security, what did you prefer, the e-gates or the human manned versions? For most people, the answer is obvious.
6. People will accept extraordinary things during a crisis –during the worst of covid, a lynch mob could have attacked you for breaking, or being interrupted to break, regulations.
7. Scaling a business gets harder over time. We grew by over 350% last year. This year we have grown by about 50%.
Clearly an exceptional figure during a recession. This shows that our model is working well as it has been for years, but it does get harder to scale as quickly once a business is more mature.
8. It is better to make decisions early –if something needs to be done, and a decision needs to be made, it is better to make it early. Waiting stores up hidden risks.
9. I should have increased my investment minimums earlier –the decision to increase my investment minimums and bring in courses and hourly guidance for those that can’t meet those minimums, should have been made in 2019.
10.Advice and guidance is worth it –I use advisors in areas which are outside my expertise. My clients this year have got far higher returns than the average do-it-yourself (DIY) investor.
One reason for this is knowledge, but another reason is that I managed to help clients with emotional control.
Whereas an estimated 35% of DIY investors panic sold during the 2020 stock market crash, none of my clients did the same.
The below graph sums it up:
11.You can’t change people’s characters. Some people will always get the job done. They will still work productively at home, in a hotel quarantine or even if they have mild Covid for that matter. Others will use any situation to procrastinate.
12.Nobody can predict the stock markets. US and some emerging markets are up 20% for the year, with the tech focused Nasdaq up more than 30%. If I had predicted that during the worst of the crisis you would have thought I am mad
13.People forget easily – Despite not predicting that the stock markets would go up 20% this year, I have said on countless times during the years that nobody can predict the markets, and markets can crash and soar unexpectedly.
I did say regularly on Quora in February, March and April that it isn’t impossible that markets would recover within a few months, and they usually recover within a few years even after a severe crisis.
Most people forget these things though, which is one reason why people continue to watch media establishments which have got so many things wrong down the years.
It is the same reason why today’s scandal tends to be used for tomorrow’s fish and chip newspaper.
14.I love freedom –I like to be able to travel, go to cafés, restaurants and other establishments without being prevented from doing so. This sounds obvious as most people like it too, but lockdown has made me very aware of this.
15.Positivity pays. 2020 has put this reality into sharp focus. Positive and optimistic people are more likely to take the calculated risks needed to get ahead. Positive people stayed invested during the crash. Positive people don’t let others drag them down.
Likewise, people that criticise other businesses are seldom good employees.
It is one of my “no no’s” when interviewing people.
16.Be aggressive when others are scared. We were ahead of the game by being fully online for years, long before it was fashionable and Covid struck.
However, we increased our marketing budget by the most dramatic amount ever during the March, April and May periods – just when most businesses, even the cash rich ones, were playing it safe.
It paid off too. April and May were our two best months of the year, although there is a chance that this month (December) could beat them both.
17.Be aggressive and diversify when others don’t see the need. Future favours the brave as per the last point. Most people are only brave when they need to be, when they are struggling.
Necessity is the mother of invention as the saying goes. Yet making zero changes when things are going well stores up hidden risks.
I have run out of the number of previous successful business owners that have reached out to me this year. Typically, in areas like hospitality and tourism.
Usually, they have been wiped out by the lockdowns, or are close to breaking point. Most didn’t ever consider planning to diversify their investment holdings and taking a risk when their business was going well. Yet diversifying your investment positions reduces risks if an unexpected event like Covid happens.
Who could now deny that investing $200,000 as a business owner in 2015 was less risky than putting 100% into a personal business?
It just feels less comfortable at the time because it feels more comforting to invest in what you know.
I have also lost count of the number of business owners that have put 100% of their eggs in one country’s basket, only to be affected by political events.
I was speaking to a gentleman who had a property business in Egypt that was flouring in 2010. 2011 and the uprisings killed his business.
He just didn’t see the utility in ‘taking a risk” and diversifying when everything was going well.
Diversification of risk and being aggressive when you don’t need to be reduces your risks long-term, because doing nothing is more risky long-term. Continually evolving is key.
18.The importance of health. Health, family and close friend relationships and time are the most important things. Managing these things correctly indirectly helps your wealth and business life as well.
19.Winnings are resilient and winning is a habit. Habits are difficult to break. Once you get into a winning habit, you become more confident and gain momentum.
Likewise, losing can become a habit, and losing can lead to a downward spiral. People who win tend to keep winning.
When I look at the companies and individuals I manage and deal with, the people who did well in 2019 were more likely to have adapted themselves during 2020.
Eventually though, winners need to adapt and avoid becoming a “previously successful old dog” as mentioned earlier.
20.The power of information. Information isn’t useful in isolation. Execution is key.
Most people will never execute no matter how much information you give them. Others are at the opposite end of the extreme and take advantage of information and use it in a sly way.
It is still important to be open when needed though.
21.You can employ, or work closely with, friends – I used to think that employing friends, or being employed by them, wasn’t a good thing. I still believe that it isn’t usually good. However, in very specific situations, it can work well.
22.Only try to control what you can. Trying to predict the future, or trying to control things you can’t control, is pointless. We can only control certain things like our thoughts, actions and behaviours.
23.Some things are blamed for everything – Brexit has became a buzzword which is blamed for everything.
Banks are blaming Brexit for closing down client accounts, when in reality many digital banks which are regulated in the same way, haven’t taken such a decision.
Likewise, regulation is blamed for everything as well, when in reality people’s processes, habits and beliefs often are more important.
Often when I have pushed a business that has blamed regulations and told them that I will be wiling to employ a lawyer if they show me which regulation they are referring to, have admitted that it is their processes and super-conservative interpretation of those regulations which is what is driving the decision.
24.The path of least resistance is incredibly important in business – I have known this for years, but in 2018, I believed in it more than in 2017.
In 2019 I believed in it more than in 2018. In 2020 I believe in it even more than in 2019!
No matter how good a product is, the consumer does not want to fill out loads of forms. When I am buying something online, I am more likely to pick the easier product to buy than the one which is the best but a hassle to buy.
My customers are the same which is why I always help make the processes easier. Despite this obvious fact, many businesses still kid themselves that consumers are reassured by a lot of paperwork.
The ideal situation is to have great products and services and ease of use. Having a great product which is difficult to buy isn’t what the consumer wants.
25.Get off the fence and don’t get into the bubble – If you have the guts to give your opinions and be 100% authentic, some people will hate you. Some will love you. Some won’t care. Yet you will get far more traction than by trying to be all things to all people.
You will also gain more traction if you break norms than just be like everybody else.
It is easier to do this if you spend time with people out of your industry. It will be more useful than being in a bubble. I have noticed that people that move jobs, cities and countries more frequently tend to be more innovative for the same reason.
2021 trends and changes
I see the following trends happening
- An increasing hostility towards people with wealth. Argentina bought in new COVID-19 related taxes, as did some other countries. I can see increased hostility towards wealthy people and companies. The most likely new taxes will be wealth, expat and digital taxes. As always, they will be bought in on the basis that they are “short-term measures” and “only” 1%.
- An increase in asset prices compared to cash.Stock, and even bond markets, have always beaten cash long-term. That has always been the case if somebody has been willing to hold assets long-term. What changed after 2008, and especially 2020, is that cash in the bank now pays below inflation. Historically it has paid 1%-2% above the rate of inflation. This partly links to the first point. After 2008 there was a lot of public anger about “the rich” benefiting from rises in the stock market. I expect to see the same trend in the 2020s even if nobody can predict the future and markets.
- A brief period where people love their freedom to meet people again. Technology use will just continue to increase long-term. We might, however briefly, see attendances at chamber of commerce events and other in-person events increase for a few months. It will probably be short-lived though, as people soon realise why they stopped attending such evens.
- Authenticity will become even more important – Existing trends, like the preference of the consumer to deal with authentic people and brands rather than a stuffy corporate image, will only continue going into 2021.
- Sustainable businesses will flourish – ESG investing will get bigger, as will most online firms, environmentally-sustainable firms and healthy food and lifestyle brands.
In many ways, 2021 could be just like 2020. Expect the unexpected and existing trends (digitalisation, remote working, authentic over corporate) will just become bigger.
In many ways Covid just forced the world to press the fast forward buttons on existing trends.
In late 2019 and early 2020, I made a video speaking about trends in the 2020s, and looked at how the world might look at the end of the decade in 2029.
It is now likely to these trends will come more quickly due to the lockdown and virus.
Of course, as this year has shown, predictions are impossible to make. All a sensible individual can do is be flat-footed.
Happy Christmas and New Year to all my followers, clients and associates.