Escaping the ivory towers
The latest ‘tech innovation’ may seem compelling, until you leave the group think echo chambers of London’s ivory towers. Head of multi-asset investments David Coombs considers how looking beyond the M25 can help us see what’s going on in the real world.
Another UK ‘tech name’ bites the dust. Laundrapp, backed by NEX Group founder Michael Spencer, has collapsed into administration. But hang on. Is this just another example of a phenomenon I outlined in my FAANGS for the memory blog in 2019? Laundrapp was a laundry business that picked up and delivered to your door for free, and you could track your laundry using its app. “Like Uber” (a taxi company) was the quote from the video on Laundrapp’s website, advising customers how to use the service, which must be very compelling if you’re worried your shirts are late home one evening.
This is NOT a tech company. It is a dry cleaner with a business model enabled by technology for customers that obviously did not value the service. This probably sounded great in the City of London, and I can imagine Laundrapp vans or bikes scuttling around Canary Wharf delivering shirts with monogrammed cuffs to flats overlooking the DLR. Not so sure this was quite as successful in the areas of the Tories new blue wall.
There is a danger that businesses seen as compelling within the M25 look a bit flakier when rolled out nationally. It is so important for investors to get out from the City’s echo chambers and group think to see what is going on in the real world.
Take the current Coronavirus situation. The market moves up or down on the latest diagnosis statistics and marks down all companies with supply chains in China or consumer markets in China. Yet again this oversimplification of a complex issue is testament to the nonsense of short term trading.
Take semi-conductor manufacturing. Many think with Chinese factories shut down this could be a positive for competitors around the world. As my colleague Siyuan has pointed out to the team this week, semi manufacturing in China, including Wuhan, has been uninterrupted. Why – many workers live on the factory campus and have been working double shifts to ensure production is uninterrupted. Imagine British Leyland in the 70’s and Red Robbo’s likely response in similar circumstances. If you are under 40 google it.
It seems we have learned very little from Brexit. The real world is not reflected on a Bloomberg screen and stochastic modelling only takes you so far. What looks amazing on a spreadsheet might be met with a resounding “You’re having a laugh, mate” in Grimsby or indeed its equivalent in Wuhan.
It has never been more important to look at the world without the London filter and read the white papers as well as the pink and indeed the tabloids as well. If you don’t know what the consumer is doing or thinking, you are likely to back the wrong app. If you had read the Sun in December rather than the FT then the election result might not have been such a surprise.
You can read more about David’s views on the tech sector in “Aesop’s unicorn”, one of the chapters in Riding the rapids, his recent report looking at some of the key investment themes for the year ahead.