NEWS FLASH! The Nasdaq burped a big burp today, falling 3.9%. Celera Genomics (NYSE: CRA), a Rule Breaker holding, has also seen much better days, as it gave up about 20% of its value today. At The Motley Fool we've long maintained that short-term moves in the stock market shouldn't freak out long-term investors. In that spirit, we'll spend the rest of today's column thinking about something else -- something that I believe is actually more interesting and much more relevant than the stock market's one-day performance: the future of the world as we know it.
When it comes to the evolution of species or businesses or the economy, I'm not a terribly deep thinker. It's the same with public policy matters. I've not read scores of articles and books on government. I've not argued and discussed evolution with friends long into the night. (I'd rather read fiction or -- gasp -- watch some TV.) Still, I'm a Fool who does think about society and the nature of evolution, among other things. And like those of any Fool, my thoughts have -- well, evolved over the years.
(By the way, did you know that just about everything that has ever been published on The Motley Fool website is still here? We believe in accountability, so we hang on to everything. Poke around the Rule Breaker archives, for example, and you'll be able to see how even the Rule Breaker portfolio managers' thinking has evolved.)
Permit me to talk a bit now about the changing nature of our world and what it might mean for the future.
Let's launch this discussion on Thayer Street, the main street in the Providence, Rhode Island neighborhood where I went to college. Back in the early 1980s, Thayer Street was home to a few national chains, such as Dunkin' Donuts. But it was mostly populated by small mom-and-pop establishments. On occasional visits over the ensuing years, I noted with dismay that many of these small operations were disappearing, replaced by Benetton (NYSE: BNG), Gap (NYSE: GPS), CVS (NYSE: CVS), Starbucks (Nasdaq: SBUX), and the like. My friends and I would shake our heads, lamenting the passing of the good old days, and even wishing that there were some kind of law to prevent what was happening. We naturally felt bad for the proprietors who lost their businesses or were forced to move. We'd been on a first-name basis with some of them. This same scenario has taken place and continues to take place all across America:
Donny Fontana's local hardware store goes out of business when a Home Depot (NYSE: HD) opens across the street. A small, local bookstore languishes due to more and more people buying from Amazon.com (Nasdaq: AMZN). Many car dealerships out there might have to close their doors one day, as more and more people buy cars online.
In the past, these changes struck me as solely bad. But I've recently startled myself by changing my view on this big-fish-swallows-small-fish phenomenon. I've begun wondering whether it's simply a natural progression, a kind of evolution. Yes, it's very difficult and painful to see unique local establishments pushed aside to make way for cookie-cutter national chains. It's unsettling to hear the death rattle of small enterprises when a Wal-Mart (NYSE: WMT) opens nearby. I used to wish that there was a way to stop this kind of progress -- but might it actually be just that, progress?
Here are some ways that these are good changes, which benefit us consumers:
- Online and bricks-and-mortar bookstores such as Amazon.com and Barnes & Noble (NYSE: BKS) offer a much wider selection of available books (and other items) than any local store.
- People in rural or remote areas can now purchase a wide selection of products online, products that previously were largely unavailable to them, not carried by any local store.
- Superstores such as Wal-Mart and Home Depot, wielding much clout over suppliers, are able to negotiate for and offer relatively low prices.
- Consumers the world over are saving not only money, but time. They can shop online in a matter of minutes during their coffee break at work. They can pop over to a mega-mart of some kind and in one place buy products that they used to have to go to several stores to buy.
- The arrival of the Internet is transferring a lot of power to consumers. Through priceline.com (Nasdaq: PCLN) and other services, buyers can now name their own price, or at least solicit aggressive bids from vendors. (One good example is the Fool-recommended method of buying a car.)
- There's simply more information now available with which to make decisions. In addition to Consumer Reports magazine, for example, we can now check out product reviews from fellow consumers on Amazon and even at FoolMart!
So perhaps the way that businesses and our economy are evolving is not so bad.
But what about those poor moms and pops? Well, I suppose you could argue that in today's relatively healthy economy with low unemployment, most of these people should be able to find other jobs. Maybe the people who used to work at the local hardware store now work at Home Depot. Maybe someone who lost a job in a small business is now working at a Starbucks store (and getting a few stock options, too!). After all, as these new upstarts grow, they do need more employees. (The Fool itself is a prime example -- check out our job listings!)
All is not necessarily rosy, though. After discussing some of my observations above with my college roommate who lives in a somewhat remote small town, I've now got more food for thought. She pointed out that while some things may be getting better (she greatly appreciates Amazon.com, for example), one thing that seems to be getting worse is service. (And, coincidentally, today's Fribble seems to agree.) I'm not sure that I entirely agree, but here are some of her concerns:
- With no small local hardware store, where she could always get knowledgeable advice, she must turn to Home Depot, where she has found the staff to be not nearly as expert and helpful.
- When hearing of how I got a great price on my new car using the Fool's suggested methods, she lamented that as more people use these techniques, traditional car dealers will be driven out of business. And when they do, it'll be much harder for people in small towns to buy their cars and get them serviced.
These concerns do have merit. Another example might be travel agents. With more people arranging airfares online, many travel agents might find it hard to survive. If they disappear, so will the extra value they offer, such as when they apply their knowledge and experience to you and your situation.
I didn't have any good answers to these concerns, except that perhaps evolution will once more improve things. Our new ways of doing business online -- Amazon, eBay (Nasdaq: EBAY), etc. -- and offline -- Wal-Mart, Costco (Nasdaq: COST) -- are, in some ways, solutions to past problems or inefficiencies. In the past, retail selections were more limited, many prices were higher, opinions and guidance from fellow consumers were harder to come by, and shopping was fairly time-consuming. These conditions changed as companies sprang up to take advantage of opportunities presented by inefficiencies.
Perhaps there are now some new inefficiencies and problems, such as a decline in customer service. Perhaps there are new opportunities on the horizon, such as servicing automobiles purchased over the Internet by people in remote areas. Maybe there are new companies on the horizon that will address these problems and inefficiencies. Perhaps instead of fretting that our way of life is going to heck in a hand basket because of these annoying companies with their new ways of doing business, we might remain ever hopeful that things are, overall, improving -- innovation by innovation.
[By the way, you may well be much more knowledgeable than me on some of these topics. I invite you to continue the discussion and offer your own thoughts on our Rule Breaker Strategies message board. And if you're not sure what you think, just drop in and "lurk"!]