Let’s assume you are a consultant helping a small American bookstore on strategy. The store has $10,000 it wants to invest on expanding its bookstore.
But at the same time, a startup is going public. That firm is named Amazon.
You have two options:
- Put that $10,000 on Amazon shares
- Invest the $10,000 to expand the bookstore
What will you do?
Date – 2018
A $100 invested in Amazon in 1997 would be $120,000 as of 2018. So, the $10k for option #1 would have brought in $12 million for the bookstore if it abandoned the whole idea of running a shop.
The second option would have been bankruptcy since bookstores in most American cities are only available in museums. Yes, he fought but Amazon was too much!
This insight came to mind when I visited a big mall in Pennsylvania USA yesterday. This is the picture of a mall that used to host thousands of cars on a weekend [you can see JC Penney there]. It was unbelievable how Amazon has dislocated the mall system – they even turned off the traffic lights because the limited cars coming to showrooms have no need for same.
Yes, the malls are showrooms – you want to buy a refrigerator in Amazon but you want to feel it physically in JC Penney before you click submit in Amazon.
A huge lesson as AI begins its journey into markets and industrial sectors: it may make sense, in some cases, to just save that money and put it in entities that make sense over trying to fight for fighting sake. May your antenna be alert to know when dislocations are happening to avoid taking the second option!
Last year, we told a real estate firm in South Africa to redesign its new mall plan to make it possible, in deep future, to serve as a residential estate in case ecommerce causes paralysis in South Africa. So, the new mall has an element that if malls business begins to crash, the properties can be easily retrofitted into a residential estate.