During turbulent financial markets when it seems like everything is different, both now and maybe forever, Integris has frequently touted the notion that in a capitalistic system profit seeking individuals and enterprises will find ways to make lemonade out of lemons. Yes, the whole “lemonade out of lemons” thing is trite, but it is also a truism that is important to acknowledge when it is tempting to modify your portfolio based on fear and emotion.
A recent article in the New York Times about the farm-to-table business on Long Island illustrated this in a small but telling way. The article observed that larger, previously thriving businesses that focused on the efficiency of producing a single food category such as ducks, cheese, or produce primarily for New York City restaurants are now suffering. Previously struggling smaller farm-to-table businesses with a less efficient, but more diversified product mix that cater to multiple client types are now thriving. The larger operations were locked into their efficient but rigid business models and were unable to adapt, while the smaller businesses could be more nimble.
We live in a dynamic world where change is the only constant. Over time what was once an advantage is now a disadvantage and what was once a leading technology is now obsolete. We can all think of examples – newspapers were once hugely profitable and now are dying a slow painful death; big box stores supplanted small local stores only to be challenged by online shopping; and of course don’t forget the grand-daddy of all obsolete products, the buggy whip. My guess is that you can easily come up with your own examples. None of these resulted in a diminution of the overall economy, as is evidenced by the steady upward growth of the world economy over time – rather, the components of the economy just changed over time.
How many of you knew of Zoom prior to COVID-19? My wife now does her Pilates on Zoom. She plays Mah Jongg with her friends on Zoom. We have a weekly Zoom cocktail hour with family members who range in age from 2 to 89 and live on the east and west coasts of the US and in Belize. It doesn’t matter whether Zoom was lucky or smart – what matters is that the company seemingly now has something that is valued in the marketplace. And if that success persists, it may impact other industries. Could Zoom change the demand for face-to-face business meetings? If so, it could permanently impact the demand for air travel, hotels, and car rentals as it relates to business travel.
All of these anecdotes and speculations are examples of the fabric of lemonade being made. If you own a globally diversified portfolio, which you do if you are an Integris client, then you don’t have to be tempted to modify your portfolio in turbulent times, because you already own a portfolio that has the seeds of the next generation of successful businesses.