COVID-19 - A transfer of wealth like never before

For regular readers of our Go Solo blog, you'll know that I usually try and put a positive spin on where we're at in this post-COVID world. I mean, if you want an example of this then my blog titled The Unemployment Opportunity pretty much sums up my attitude of how to turn a negative into a positive.

However, what many people aren't talking about is how even in a world of great uncertainty, deep recession, growing unemployment, and bearish attitudes to personal wealth, the stock market continues to rally.

For what it's worth, I've been hearing for 2-3 years now about how the markets were overvalued and were ready for a much-needed correction. However, this just hasn't come to pass, beyond a slight dip at the start of COVID-19...

So what's going on in the world and what does this mean for the 99%? Let's dig a little deeper into the huge transfer of wealth currently taking place right now!

A wealth transfer you say?

It's really not too hard to explain what a wealth transfer is and why it's happening at pace. In fact, the evidence is right there in front of us every day because ultimately the stock market is a representation of Big Business, their current performance, and potential future outlook.

The stock market is not a representation of the world economy or national, localised economies. It's a snapshot of confidence in national and global corporations and a bet on who is able to best adapt and likely even thrive through this global pandemic.

Whilst a V-shaped recovery happened pretty rapidly in the markets, it's going to take much longer to recover for individual countries, their people and their overall business outlooks.

COVID-19 has accelerated change like nothing else and the scars on small businesses, employees and small towns all over the world will be felt for a very long time to come.

Big Business vs the little guys...

'Big Business' is prospering through the pandemic, mainly at the expense of local retailers, smaller hospitality venues (restaurants and bars), and independent service-based businesses who just don't have the resources to compete with the bigger national or global players who can operate at scale.

It's true that this was always likely to naturally happen in terms of better resourced and highly capitalized businesses thriving through tough times, especially as trends over the past sixty years or so have moved consumers to purchase their goods from one or two suppliers each week (hello supermarkets...) than from individual stores.

But Big Business is also well known to have a ruthless, predatory streak, sensing that right now there is a big opportunity to gain market share and in essence sweep away the competition by lasting longer in the 'Wild West' of coronavirus.

They can discount harder and lobby the loudest to be excluded from damaging regulatory policies that restrict their ability to operate. If anything, Big Business is in high expansion mode, realizing that they can secure new territory at a fraction of the price of normal times.

The individual is caught up in this wealth transfer as well

It's not just Big Business that is thriving in this pandemic too...

In Column A you have your 'Average Joe's', the squeezed middle classes, and those deemed comfortable but not super-wealthy. You also have your small business solo entrepreneurs and those independent industries that are highly exposed to COVID.

In Column B you have traders, wealthy investors, and those who have the savings built-up to take a punt now and play the long game in terms of their portfolios.

So what's been happening is that for a lot of our Column A guys, they've been affected to a point by unemployment, spending their savings, possibly having their businesses fail and falling into bankruptcy due to lack of liquidity. They've become increasingly cautious about their present situation and are now entering into survival mode.

When it comes to paying for the pandemic, it'll likely be the squeezed middle classes who pick up the check once again!

Where for our Column B'ers - we're seeing them take advantage of the situation by snapping up cheap assets (after the first Spring 2020 COVID Market dip) at low-interest rates, plus pumping their money into the Big Businesses which are a smart bet right now.

It's not the Column B'ers fault - it's a great opportunity that you'd take if in their position, but essentially what's happening now is an even wider gap is opening up between the haves and have-nots of society.

Ok, so there may be some over-simplification from me here in terms of what's happening (I'm also actively trying not to write War and Peace here too...) but this is currently where we're at and this trend is only going to happen more as the full effects of COVID become visible.

In a perverse way, Column A is feeding the growth of our guys from B by selling up their stocks and shares on the cheap, and moving to Big Business suppliers like Amazon and Walmart for products and services that are cheaper and more accessible than independent businesses...

All hail King Bezos et al

Of course, I couldn't get through this blog without a mention of probably the biggest beneficiary of the global pandemic.

Whatever your opinion of Jeff Bezos, I think it's safe to say that he's a super-smart guy!

What he's done at Amazon over the past 25 years has been nothing short of phenomenal. And he's following in the footsteps of our earliest human ancestors in hacking natural ecosystems to rise to the top. Forget lions, forget sharks - humans reached the top of the food-chain through their brains and this is what Amazon and other macro businesses are doing right now in looking to horizontally dominate numerous markets and product categories.

Scale, speed, cost, convenience, few physical assets, a COVID-proof business model, and an incredible 360 eCommerce platform have all contributed to Amazon's success which has gained years of ground and customers wallets in just a few short months.

The same goes for other 'tech giants' with Google and Apple One bundling, and Costco offering everything under one roof.

On a fitness level, personal trainers, independent gyms and wellness professionals are now all having to compete for market share with Apple One and Peloton. This itself has become increasingly difficult due to the high-quality online production values and well designed digital services that these market-listed behemoths can offer. Plus they can of course leverage digital economies of scale to sell millions of subscriptions to the same app over and over again.

Consolidation is happening and it's happening at pace people...

The further homogenization of planet earth

If independent businesses are failing and Big Business is thriving then unfortunately we're heading for greater consolidation and a more homogenous shopping, service and retail experience. Goodbye mom-and-pop stores, local bodegas, and independent restaurants... Hello, online (location free) shopping, hyper-markets, and even more chain restaurants...

Goodbye, many high quality independent yoga studios who have had just about every problem thrown at them in an effort to survive through the pandemic (little in government support, little reduction in rents, customers unable to social distance or not feeling comfortable or safe leaving their houses...)

Oh dear...please tell us there's some good news on the horizon!

The fightback from independent businesses begins now

But it's not all doom and gloom...

I'm a glass-half-full guy, and I'm going to use that word 'opportunity' again.

That's because the fightback will have to begin soon, simply because our global population will not settle or stand for a beige, average, one size fits all boring society.

So this is the opportunity for those of us who have been laid off, who have lost out financially, or those who simply want to create our own businesses to seize the initiative and get on with building our own version of a new reality.

That new reality could well be through creating an independent store, developing a new service based business, class, or studio, or building an offering that competes with Big Business, but offers all of the authenticity, personal attention, niceties, experience, and customer service that the macro giants swept away in pursuit of efficiency and a healthy profit margin.

Customers will vote with their feet and wallets as well as their hearts and minds for the planet they want to be a part of. It could well be that not 'shopping independent' or not 'supporting local' becomes a societal, outrageous thing on a par with say smoking indoors or driving gas guzzlers nowadays.

The fightback against Big Business could well be a collective political statement, and one that develops whole new industries, empowering the globes' micro-entrepreneurs to unite and take action as a collective...

Yes, COVID-19 has sped up the decline of traditional industries and has accelerated trends that were happening anyway. Yes, this huge wealth transfer is happening right now.

But do you know what? There's always a reaction to extreme things that happen in life and I'm excited and intrigued to see how small businesses and entrepreneurs collectively organize, unite and strategize to offer those ultra nimble and curated experiences that Big Business simply can't provide or won't be able to compete with.

Entrepreneurs, let's do this - the future can still be yours!

Until next time...keep winning...

Jonny Quirk

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