Business is absolutely fascinating. It’s a 24/7/365 game that we all take part in every single day. Everything we do and everything we use is the product of business.
I’m writing this on a couch made by Ikea, with a lamp from Amazon, on a Mac from Apple, listening to music from Spotify.
How cool is that?
Here’s something even cooler-I just listed a few different companies there:
I’d be willing to bet money that all four of them will be out of business within 50 years. I’ve written in the past specifically on why Amazon is in trouble.
The reality is business cycles are increasing rapidly
It’s now so much easier than it used to be to start a business. Back in the day, you needed all kinds of specialized skills to start a business. Good luck trying to start an online business in the early 2000s without some programming knowledge.
Now, it’s easy to throw together a landing page and use it to build a billion-dollar business. Hell, that’s precisely what Door Dash did.
What that means for business though is there are more competitors than ever before.
Back in the day, a large incumbent like Marriott would only have a few competitors to worry about. With just a few startups trying to beat Marriott, there wasn’t that large of a shot someone would be successful.
Just look at the numbers: the odds of starting a billion dollar company is 0.0006%. From a sheer number’s perspective, if you have 1,666,666 startups in the industry, one of them will become a billion dollar company.
That’s why Things change when there are more competitors. Now, there are unlimited companies giving it their best shot to beat Marriott. The sheer volume of people trying meant someone would eventually succeed. Is it any wonder that a company like Airbnb emerged?
What does that mean for today’s industries?
Let’s go back to my first claim: Amazon, Apple, Ikea, and Spotify will all go out of business in the next 50 years.
There are hundreds of startups trying to beat each one of those large companies at their own game. With that many competitors, it’s only a matter of time until one startup works and drives the incumbents out of the market.
That means most industries today will face terrible competition from innovation. The tech industry is an obvious one. Netflix destroyed Blockbuster, but others will try to beat Netflix at their own game. Eventually, someone will succeed at that.
Same with auto companies. They’ve been around for ~100 years, but eventually, someone will launch self-driving cars that push the incumbents out of business.
The reality is this: almost every industry is defined by ruthless competition that drives current players out of business.
Check out this graph by Credit Suisse below.
You’ll notice that a company in the S&P 500 during the ’50s was pretty much guaranteed to stay there for more than 60 years! Today, a company will only be there for ~20 years before failing. Again, business cycles are getting faster.
So the next logical question is this: which industries are best positioned for the future?
Said another way: which industries will be immune from the ruthless competition seen in tech?
Start with the basics: what will humans always need?
The easiest way to do this analysis is to go back to basics and look at what human beings will always need in their lives.
For example, there will always be some sort of food industry. I don’t know for sure if the future will be dominated be grocery stores, Instacart, Blue Apron meal kits, Uber Eats, or some combination of all. But I do know there will be some sort of food industry.
Similarly, there will always some sort of real estate/housing industry. Whether that’s people living in Airbnb’s or buying homes with Compass or co-living at a WeLive, people will always need somewhere to lie down and go to sleep.
Despite the constant need for food and a place to sleep, I don’t think either of these industries are well positioned for the future. I personally wouldn’t invest here.
The reason why is there will be constant competition from startups. Look at some of the companies listed above:
- Blue Apron
- Uber Eats (also Doordash, Postmates, and more)
It’s too complicated to compete here because the industry is too ‘sexy.’ Everyone wants to launch the next Airbnb. It’s exciting and interesting and correspondingly full of competition
However, there’s one industry that humans will always need and is decidedly un-sexy
So we’re looking for an industry that humans will always need and does not attract a lot of competition. That industry should be well positioned for the future.
That’s right, garbage. I think it’s the best-positioned industry for the future. I can’t invest in stocks due to my job, but I would go heavy into the garbage space.*
Here’s why it’s super exciting to me as a strong industry now and in the future
Humans will always create garbage and need a way to get rid of it
The EPA shows that the amount of waste produced has steadily increased. I see no reason for it not to grow. As long as humans are going to the grocery store to buy bottles of milk, garbage will be created.
One could argue that all containers could eventually become compostable at home. Not only is that technology far off, but the sheer volume of garbage creation is vast. In fact, Americans create 4.6 pounds of garbage per person per day. If you wanted to compost at home, you’d spend your entire day doing it.
Garbage doesn’t see a lot of competition
Despite it being a fascinating industry and well-paying industry, so few people are actually interested in garbage enough to launch a startup. In fact, I’ve looked pretty hard and cannot find more than a handful of startups in the trash space.
Based on what we saw earlier, ‘sexy’ industries get a large number of competitors that drive the entire industry to change. It doesn’t look like that’s happening in the garbage space.
Physics limits what garbage innovation can do
Let’s use the milk bottle example again. You’re standing in your kitchen and just finished it. Now what?
Well, you’re creating nearly 5 pounds of trash per day. Most Americans now live in urban areas, so you don’t have a ton of space to store the milk bottle and the other waste you created today. That means you need to get rid of it.
Okay, so there are three solutions here to get rid of it.
- You could burn it. This is dangerous and horrible for the environment, so not a likely solution now or in the future.
- You could compost it. This is extremely difficult to do in an urban area, and the science isn’t there yet for plastic milk bottles
- You could put it in a bin, and someone takes it away.
Number three is the most logical solution here. It’s also precisely what the industry does now. I think they’ll keep doing it that way for a long time to come as well.
Garbage is the industry best positioned for the future
It sounds nuts in a world of cutting-edge, high tech innovation to point to something like garbage. Yet, I think trash is well positioned for the future because it’s an unsexy industry without competition. Even better, it’s an industry humans will always need.