Post Corona: From Crisis to Opportunity

Synopsis

What will the world of business look like after the coronavirus pandemic? The pandemic will accelerate every trend by a decade and redefine entire industries. Foundational sectors like healthcare, education and transportation are on the verge of unprecedented disruption as the market rewards innovators like Tesla with massive valuations.

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What are the potential challenges for businesses in the post-pandemic world?

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Businesses in the post-pandemic world may face several challenges. These could include adapting to accelerated trends and industry redefinitions, coping with disruptions in foundational sectors like healthcare, education, and transportation, and competing with innovators who are being rewarded with massive valuations. Businesses may also need to navigate changes in consumer behavior and expectations, as well as potential shifts in regulatory landscapes.

How might the pandemic affect the competition in various sectors?

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The pandemic might affect competition in various sectors by accelerating trends and redefining industries. Sectors like healthcare, education, and transportation could face unprecedented disruption as the market rewards innovators. Companies that can adapt to the new normal and innovate may gain a competitive edge.

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In his timely book Post Corona: From Crisis to Opportunity, Scott Galloway presents a clear-eyed overview of this great transformation, the new business environment, Big Tech's dominance, and who stands to win and lose in this new age.

Top 20 insights

1. Ecommerce's share of U.S. retail, which had been growing by one percent every year, jumped by 11% within eight weeks of the pandemic hitting the United States. The strong performance of big companies fueled the U.S. stock market recovery. However, medium companies declined, and smaller companies got hit the hardest. While the S&P registered growth by mid-July 2020, mid-caps were down 10%, and small caps dropped by 15%. Brands that were already going down, like JCPenny and Neiman Marcus, got hit the hardest.
2. A large portion of the stimulus capital that entered U.S. capital markets went towards innovative firms. Tesla's valuation exceeds Toyota, Daimler, Volkswagen and Honda combined, even though it will manufacture only 400,000 cars rather than 26 million cars manufactured by the other four in 2020.
3. Sectors will witness market consolidation around innovators or market giants with solid balance sheets, high-value assets, cheap debt and low fixed costs. Firms like Costco, Honeywell and Johnson and & Johnson, which have $11 billion, $15 billion and nearly $20 billion respectively in their bank accounts, will have their pick of assets and customers when weaker competitors shut down.
4. A company's survival depends on the sector's health and its position within it. Non-dominant companies within weak sectors must leverage current assets to pivot to new lines of business. Thryv Holdings, America's largest yellow pages company, used its relationship with thousands of small businesses to pivot into Customer Relationship Management.
5. Companies must become capital-light and move to a variable cost structure by leveraging other people's assets. Uber rents space in other people's cars driven by non-employees. So when revenue went to zero during the pandemic, Uber's costs went down by 60- 80%. Despite the hospitality industry taking a huge hit, Airbnb is well-positioned to take a more significant industry share.
6. 82% of corporate leaders plan to allow partial remote work, and 47% intend to offer full-time remote work in their organizations. But remote work has its share of drawbacks. Serendipity is key to innovation, and presence strengthens accountability. Companies must offer creative perks like home office supplies and grocery debit cards to support remote work.
7. After Covid, more employees will demand work from home from their organizations. Individuals with salaries over $100,000 will have an easier time making the demand. This will create a higher separation of classes after Covid. 60% of jobs that pay over $100,000 can be done from home compared to just 10% of jobs that pay below $40,000.
8. The Brand Age, where companies sold mass-produced products for irrational margins by creating emotional associations through advertising, has ended. The Product Age powered by online discoverability has begun. When advertising spends return, they will flow towards online platforms. Facebook and Google will account for 61% of the digital ad market in 2021.
9. There are primarily two digital business models. Companies sell products for a profit or monetize their users. Android offers cheaper, privacy-invasive smartphones, while iOS demands a premium for a product that respects privacy. As privacy becomes more central, these models will become incompatible. Apple will abandon Google search even when Google pays $12 billion every year.
10. Post Corona, Amazon, Google, Facebook, Apple, and Microsoft's market dominance will only grow stronger. Big Tech makes up 21% of the value of all publicly traded companies. Amazon and Apple added Disney, AT&T/Time Warner, Fox, Netflix, Comcast, Viacom, MGM, Discovery and Lionsgate to their market capitalization between Jan 2019 to February 2020.
11. Big Tech companies leverage their market dominance to create flywheels - virtuous cycles that generate growth without proportional costs. Apart from rapid delivery, Amazon Prime offers video streaming to increase the time spent on its platform. Apple dominated the wearables business (Apple Watch, AirPods and Beats) with $20 billion in revenue in 2019 because its flywheel connects phones, watches and wearables, an advantage that Rolex or Bose cannot compete against.
12. Big Tech has transformed entire industries into features. Amazon has outperformed FedEx and made the delivery industry into Prime feature. The media industry, worth hundreds of billions of dollars, will become a customer acquisition vehicle for Apple and Amazon's core business.
13. Massive market capitalization also creates problems for tech giants. Investors expect Big Tech companies to add nearly a trillion dollars in revenue over five years. Only a few sectors can provide that growth: Healthcare, Life Insurance and Education. Big Tech firms will have to enter these markets and compete with each other.
14. Amazon's signature move is to transform cost centers into revenue heads. It does this by leveraging its scale and access to limitless cheap capital to make massive investments that others just cannot match. Amazon built the best data center capabilities in-house and sold them to other companies through Amazon Web Services(AWS). It leveraged its warehouse and distribution expertise to launch Amazon Marketplace.
15. Amazon has more customer insight than any insurance actuary. It can leverage that to foray into insurance. Further, it can enter healthcare and offer telemedicine services through Alexa as the pandemic has removed regulatory bottlenecks. Combined with its retail, pharmacy and wearables, Amazon can offer an integrated healthcare product to rival hospitals.
16. Companies must find ways to create recurring revenue models by offering bundled services. As a product manufacturer, Apple should have taken a hit during the pandemic. However, it had transitioned into a software company with recurring revenue through massive investments in iCloud, Apple T.V., Apple Cloud and Arcade. Recurring revenue contributed 23% of Apple's 2019 revenue, cushioned it from the pandemic and doubled its valuation.
17. Most products depreciate. To dominate, companies must build Benjamin Button products that become more valuable with every use. The Benjamin Button effect is the result of more user data and network effects. Spotify adds more users every year, attracting more artists and giving the company more data to improve its personalization. Similarly, Netflix's recommendations improve each time a user watches a movie or a T.V. show.
18. Evolutionary psychology says that brands can appeal to customers in three ways. They can target the "brain," the "heart," or "genitals." Brands that appeal to the brain make rational claims of higher value or lower prices like Amazon. Companies like Facebook tap into the heart's instinct to care for friends and family. Finally, brands can appeal to the sexual instinct to feel more attractive to sell premium products at irrational margins like Tesla.
19. Academia, healthcare and insurance are waiting for disruption. Industries are open to disruption when there is a dramatic increase in price without a corresponding increase in value, a heavy reliance on brand equity or customer ill-will. College tuition has increased 1400% over 40 years without significant value addition. The average family coverage premium has increased 54% in 10 years.
20. After Covid, Big Tech will move into academia. Clayton Christensen predicted that 50% of colleges and universities would go out of business in the next 10 to 15 years. Big Tech firms may partner with academia to offer 80% value of a four-year degree to thousands at 50% of the cost. MIT and Google could jointly design a $50,000 two-year program that enrolls 100,000 students to generate $5 billion every year.

Summary

The pandemic has accelerated every social and business trend by ten years and opened the floodgates for disruption in multiple sectors. This book tries to predict the future of business, education and society in the post-pandemic world.

The great acceleration

Ecommerce's share in U.S. retail was growing at about one percent every year. Within eight weeks of the pandemic, the number jumped from 16% to 27%. A decade of ecommerce growth took place in eight weeks. Apple took 42 years to reach $1 trillion in value and just 20 weeks to grow to $2 trillion. Trends in economic inequality and unemployment have accelerated as well. Twenty million jobs were added over the last ten years. Forty million jobs were lost within ten weeks. Forty percent of households with income below $40,000 were laid off or furloughed compared to just 13% percent of households over $100,000.

Questions and answers

How can governments support businesses during economic crises?

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Governments can support businesses during economic crises in several ways. They can provide financial assistance in the form of loans, grants, or tax relief. They can also implement policies that encourage consumer spending to stimulate the economy. Additionally, governments can invest in infrastructure projects to create jobs and stimulate economic growth. They can also provide guidance and resources to help businesses navigate the crisis and plan for recovery.

What are the potential strategies to address the issue of unemployment post-pandemic?

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Potential strategies to address the issue of unemployment post-pandemic could include:

1. Encouraging entrepreneurship and innovation: This can create new jobs and industries.

2. Investing in education and training: This can help workers adapt to new industries and technologies.

3. Implementing policies that promote job creation: This could include tax incentives for businesses that hire new employees, or public works projects that create jobs.

4. Expanding social safety nets: This can provide support for those who are struggling to find work.

5. Promoting remote work: As the pandemic has shown, many jobs can be done from home. This can open up new opportunities for those who were previously unable to work due to geographical constraints.

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The pandemic opens opportunities for innovation as well. The three largest U.S. consumer categories - healthcare, education and grocery are being fundamentally disrupted. Most people were forced to access healthcare and remote learning and order groceries online. A decade's worth of habits became forged in a matter of weeks.

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How have these changes affected the regulatory landscape in these sectors?

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The text does not provide specific information on how the regulatory landscape in these sectors has been affected by the changes. However, it can be inferred that the sudden shift to online platforms for healthcare, education, and grocery shopping due to the pandemic may have necessitated new regulations or adjustments to existing ones to ensure the safety, privacy, and rights of consumers.

What are the implications of these changes for the digital divide?

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The implications of these changes for the digital divide could be significant. As healthcare, education, and grocery shopping move online, those without access to reliable internet or digital devices could be left behind. This could exacerbate existing inequalities and create new ones. However, it could also spur efforts to close the digital divide, as the importance of digital access becomes even more apparent.

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The strong get stronger

After a brief plunge, markets continued to climb even as the death toll hit 100,000. This "recovery" is due to the outsized gains of Big Tech and a few other giants. By July 31, the S&P 500 had recovered to January 1 levels, but mid-caps in the S&P 400 were down 10%. Small-caps in the S&P 600 were down 15%. Firms with weak balance sheets were being slaughtered, including prominent names such as Neiman Marcus, JCPenny, Gold's Gym and California Pizza Kitchen. When weaker competitors shut down, the firms like Johnson & Johnson, which has $20 billion in the bank, will choose the best assets and customers. The most significant damage from an economic standpoint will come from medium and large companies with weak balance sheets and many employees.

Questions and answers

How did the pandemic redefine the business environment and the dominance of Big Tech?

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The pandemic has significantly redefined the business environment and the dominance of Big Tech in several ways. Firstly, it has accelerated the shift towards digitalization, with businesses increasingly relying on technology to operate remotely. This has led to a surge in demand for Big Tech's products and services. Secondly, the pandemic has exposed the vulnerability of businesses with weak balance sheets, leading to their downfall. This has allowed Big Tech companies, with their strong financial positions, to further consolidate their market dominance by acquiring the best assets and customers of these failing businesses. Lastly, the pandemic has accelerated trends towards online shopping, remote work, and digital entertainment, all areas where Big Tech has significant presence.

What are the implications of the economic damage on companies with weak balance sheets and many employees?

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Companies with weak balance sheets and many employees are likely to face significant challenges in the face of economic damage. They may struggle to maintain operations, pay employees, and service debt. This could lead to layoffs, bankruptcy, or even closure. Furthermore, these companies may become targets for acquisition by stronger firms, which can pick and choose the best assets and customers. The most significant damage from an economic standpoint will come from medium and large companies with weak balance sheets and many employees.

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Markets make big bets on vision and growth narratives over hard numbers, leading to significant gains for innovators and market giants and steep declines for smaller firms and incumbents. Companies that have been doing well have benefited remarkably while weaker competitors have been shut out of capital markets had debt ratings cut, and customers worried about long-term deals. Firms that are deemed innovative are seeing valuations that reflect estimates of cash flows ten years from now discounted back at low rates. That's why Tesla's value exceeds the value of Toyota, Volkswagen, Daimler and Honda combined, even though it will produce just 400,000 cars in 2020 while the other four will build 26 million cars.

Questions and answers

What are the key takeaways from "Post Corona: From Crisis to Opportunity" that are actionable for entrepreneurs or managers?

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1. Embrace innovation: The post-pandemic world will reward innovators and market giants. Companies that are deemed innovative are seeing valuations that reflect estimates of future cash flows.

2. Be prepared for disruption: Foundational sectors are on the verge of unprecedented disruption. Entrepreneurs and managers should be ready to adapt to these changes.

3. Focus on growth narratives: Markets are making big bets on vision and growth narratives over hard numbers. This leads to significant gains for those who can effectively communicate their growth story.

4. Be financially resilient: Weaker competitors have been shut out of capital markets and had debt ratings cut. It's important to maintain financial health to survive in the post-pandemic world.

How does 'Post Corona: From Crisis to Opportunity' relate to contemporary issues and debates about business innovation and growth?

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'Post Corona: From Crisis to Opportunity' is highly relevant to contemporary issues and debates about business innovation and growth. The book discusses how the COVID-19 pandemic has accelerated trends and redefined industries. It highlights how markets favor vision and growth narratives, leading to significant gains for innovators and market giants. The book also points out that companies deemed innovative are seeing valuations that reflect estimates of future cash flows. This is evident in the example of Tesla's value exceeding that of traditional car manufacturers combined. Therefore, the book provides valuable insights into the current business landscape and the importance of innovation and growth in the post-pandemic world.

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Adapting to the crisis

The company's sector and relative strength within the sector are critical determinants of survival. Companies in weak sectors without market dominance will have to explore pivots into more substantial sectors. Are there assets that can be leveraged to create a new line of business? The country's largest yellow pages company successfully leveraged its relationship with many businesses to pivot into a Customer Relationship Management(CRM) company. If the business is in structural decline, generate the last drop of revenue from the brand instead of giving it another lifeline. Plan a graceful exit by using those profits to ease the transition for employees and customers.

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What are the potential opportunities for businesses post-corona as discussed in the book?

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The book discusses that the post-corona world will accelerate every trend by a decade and redefine entire industries. Companies in weak sectors without market dominance will have to explore pivots into more substantial sectors. They can leverage their assets to create a new line of business. For instance, a yellow pages company successfully leveraged its relationship with many businesses to pivot into a Customer Relationship Management(CRM) company. If the business is in structural decline, it's suggested to generate the last drop of revenue from the brand instead of giving it another lifeline and plan a graceful exit by using those profits to ease the transition for employees and customers.

How has the coronavirus pandemic accelerated the need for businesses to explore pivots into more substantial sectors?

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The coronavirus pandemic has created a challenging business environment, particularly for companies in weak sectors without market dominance. These companies are compelled to explore pivots into more substantial sectors for survival. The pandemic has accelerated this need as it has caused a rapid shift in market demands and consumer behavior, making some sectors less viable than others. Companies are now required to leverage their assets to create new lines of business or risk being in structural decline. For instance, a yellow pages company successfully leveraged its relationship with many businesses to pivot into a Customer Relationship Management (CRM) company. Thus, the pandemic has not only highlighted the importance of adaptability and innovation in business but also expedited the need for it.

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Radical cost cutting

For weak companies, survival depends on radical cost-cutting. Get to the lowest cost-base as fast as possible by suspending rent-payments, selling inventory at reduced prices and reducing compensation, beginning with the highest earners. Explore alternative means of compensation like equity and vacation. Apart from cutting costs, try to do more with assets that cannot be shed. Universities have high fixed costs due to tenure, solid unions and facilities. However, many of them are investing in technology to lower costs per student by reaching more students.

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How has the book 'Post Corona: From Crisis to Opportunity' influenced corporate strategies in dealing with financial crises?

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The book 'Post Corona: From Crisis to Opportunity' has influenced corporate strategies in dealing with financial crises by emphasizing the importance of radical cost-cutting and efficient use of assets. It suggests that companies should quickly reduce their cost-base by measures such as suspending rent payments, selling inventory at reduced prices, and reducing compensation, starting with the highest earners. It also encourages exploring alternative means of compensation like equity and vacation. Furthermore, it advises companies to try to do more with assets that cannot be shed, for instance, by investing in technology to reach more customers or students, thereby lowering costs per unit.

How can small businesses apply the cost-cutting strategies mentioned in 'Post Corona: From Crisis to Opportunity' to survive economic downturns?

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Small businesses can apply the cost-cutting strategies mentioned in the book by first identifying their highest costs and finding ways to reduce them. This could involve suspending rent payments, selling inventory at reduced prices, and reducing compensation, especially for the highest earners. They could also explore alternative means of compensation like equity and vacation. Additionally, they should try to do more with assets that cannot be shed. For instance, if they have physical spaces that are not being fully utilized, they could consider renting them out to generate additional income. Lastly, investing in technology could help lower costs in the long run by increasing efficiency and reaching more customers.

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Cloud cover for big decisions

Now is a good time for businesses to start afresh and rethink their value proposition for a post-corona world. Companies get the cloud cover to make big decisions and bold bets as there is no pandemic playbook. Use this to reimagine market strategy, labor composition and place big bets for the future.

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How do the theories presented in "Post Corona: From Crisis to Opportunity" challenge existing paradigms or practices in the business world?

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The theories in "Post Corona: From Crisis to Opportunity" challenge existing business paradigms by suggesting that the pandemic will accelerate every trend by a decade and redefine entire industries. It encourages businesses to rethink their value proposition for a post-corona world, make big decisions, and place bold bets for the future. This challenges the traditional approach of gradual change and adaptation.

What is the potential for the ideas in "Post Corona: From Crisis to Opportunity" to be implemented in real-world scenarios?

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The potential for the ideas in "Post Corona: From Crisis to Opportunity" to be implemented in real-world scenarios is significant. The book suggests that the pandemic will accelerate every trend by a decade and redefine entire industries. Businesses can use this opportunity to rethink their value proposition, reimagine market strategy, and make bold bets for the future. However, the implementation of these ideas would depend on the specific circumstances of each business and the industry they operate in.

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The Covid gangster move

The killer move is to have a variable cost structure by leveraging other people's assets. Uber rents space in other people's cars driven by non-employees. When revenue hit zero in the pandemic, Uber's cost correspondingly went down by 60% to 80% and its share price held value. For similar reasons, Airbnb is well-positioned to survive the pandemic and take advantage of the work-from-anywhere model enabled by a boom in remote work.

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How has the book 'Post Corona: From Crisis to Opportunity' influenced corporate strategies or business models during the pandemic?

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The book 'Post Corona: From Crisis to Opportunity' has influenced corporate strategies and business models during the pandemic by emphasizing the importance of having a variable cost structure. This concept, as demonstrated by companies like Uber and Airbnb, involves leveraging other people's assets to reduce costs. When revenue decreases, as it did during the pandemic, the costs can also decrease significantly, allowing companies to maintain their value. The book also highlights the potential of the work-from-anywhere model, which has been enabled by the increase in remote work.

Are there other examples of companies that have successfully implemented a variable cost structure by leveraging other people's assets?

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Yes, there are several other companies that have successfully implemented a variable cost structure by leveraging other people's assets. For instance, WeWork leverages real estate assets to provide flexible workspaces. Similarly, TaskRabbit and Upwork leverage the skills and time of freelancers. These companies don't own the assets they monetize, which allows them to scale rapidly with relatively low costs.

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Looking ahead

The future of remote work

The open question is whether technology can disperse work without sacrificing innovation and productivity. Ideas emerge from serendipitous conversations, and presence is key to fostering accountability and building relationships. However, presence is costly in terms of real estate, commute and other costs. As of June 2020, 82% of corporate leaders plan to allow remote working some of the time, and 47% intend to offer full-time remote work going forward. Companies need to think of creative ways to support employees. Reduce office snack spends and offer monthly grocery debit cards.

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How can a startup use the concept of remote work covered in 'Post Corona: From Crisis to Opportunity' to grow?

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A startup can leverage the concept of remote work to grow by reducing overhead costs such as office space and commute expenses. This can free up resources to invest in other areas of the business. Additionally, remote work allows startups to tap into a global talent pool, not being limited by geographical constraints. It's also important to maintain productivity and innovation in a remote setting. This can be achieved by fostering a culture of accountability, facilitating virtual brainstorming sessions, and providing support to employees in terms of resources and tools they need to work effectively from home.

What insights does 'Post Corona: From Crisis to Opportunity' offer into how the pandemic has influenced corporate strategies?

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The book 'Post Corona: From Crisis to Opportunity' offers insights into how the pandemic has accelerated trends and redefined industries. It discusses how foundational sectors are on the verge of unprecedented disruption as the market rewards innovation. The book also explores the concept of remote work, its impact on innovation and productivity, and how companies are adapting to this change. It suggests that companies are considering creative ways to support employees, such as reducing office snack spends and offering monthly grocery debit cards.

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Offer gift cards for office supplies to set up good home offices. While remote work offers flexibility, a reduced commute and more savings, it also has its share of risks. A job moved out of metro areas can be moved overseas. Presence has implications for who is on the top of the executive's mind for promotions and opportunities. Remote work benefits will distribute unevenly to society. 60% of jobs that pay over $100,000 can be done from home compared to just 10% of jobs that pay below $40,000. Flexible satellite offices, distributed across the country, where people can work alone or in teams, could be the future.

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Could you elaborate on the concept of presence and its implications for promotions and opportunities in a remote work setup?

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In a remote work setup, the concept of 'presence' refers to the visibility and active participation of an employee in work-related activities. It's not just about being physically present, but also about being actively involved in discussions, meetings, and decision-making processes. This can be challenging in a remote setup as traditional indicators of presence, like physical attendance, are absent. However, it can be demonstrated through regular communication, responsiveness, and quality of work. The implications for promotions and opportunities are significant. Employees who manage to maintain a strong presence are more likely to be considered for promotions and opportunities, as they are on top of the executive's mind. They are perceived as engaged, committed, and reliable, which are desirable traits for higher responsibilities.

How can a startup leverage the concept of flexible satellite offices for growth?

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Startups can leverage the concept of flexible satellite offices for growth in several ways. Firstly, it allows them to tap into talent pools in different geographical locations, thus not limiting themselves to one area. Secondly, it can reduce overhead costs as the need for a large central office space is eliminated. Thirdly, it can increase employee satisfaction and productivity as employees have the flexibility to work from locations that suit them best. Lastly, it can also help the startup to establish a presence in multiple markets, which can be beneficial for business expansion.

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From brand age to the product age

From World War two till the rise of Google, the formula for shareholder value was to create compelling brand associations for mass-produced products. Branding injected emotion into inanimate products resulting in consumers willing to pay irrational margins. In 2020, the Brand Age gave way to the Product Age. In the Brand Age, a traveler to New York would go to the Ritz because that's the brand she knows. In the Product Age, a Google search reveals that the Ritz is overpriced, and instead, she finds a boutique hotel based on crowdsourced recommendations. The losers in this transition are the media companies and advertising firms. When advertising spending returns, it will flow only to Product age firms like Google and Facebook and not traditional media. Predictions put Google and Facebook's combined share of the digital ad market at 61% in 2021.

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Two conflicting business models

There are two fundamental business models. A company can sell a product for more than the cost of production. Otherwise, companies can offer subsidized products to sell customer attention and behavioral data. Most digital industries will bifurcate along this divide. Android phones offer a great product for low upfront costs but at the cost of privacy, while iOS offers a luxury privacy-conserving product for premium margins. These models will become increasingly incompatible as privacy becomes a core issue. Apple could give up its $12 billion a year contract to make Google the default search engine and develop a competitor. Similarly, Shopify leveraged exploitation by Amazon to offer a simple product to sellers. Sellers control the data, branding and the customer while Shopify gets a simple fee.

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How might a traditional retail company apply the innovative approaches of privacy-conserving products or data-controlled selling?

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A traditional retail company can apply the innovative approaches of privacy-conserving products or data-controlled selling by adopting a business model that respects customer privacy and gives control of data to the customers. This can be achieved by offering products or services that do not rely on selling customer attention and behavioral data. Instead, the company can charge a premium for products or services that ensure customer privacy. For instance, like Apple, they can offer a privacy-conserving product for premium margins. Alternatively, they can follow Shopify's model where sellers control the data, branding, and the customer while the company gets a simple fee.

How does the bifurcation of business models in digital industries challenge traditional practices?

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The bifurcation of business models in digital industries challenges traditional practices by creating a divide between companies that sell products for more than the cost of production and those that offer subsidized products to sell customer attention and behavioral data. This divide is becoming increasingly incompatible as privacy becomes a core issue. For instance, Android phones offer a great product for low upfront costs but at the cost of privacy, while iOS offers a luxury privacy-conserving product for premium margins. This could lead to companies like Apple giving up lucrative contracts to develop competitors that align more with their business model. Similarly, companies like Shopify have leveraged exploitation by larger companies to offer simple products to sellers, allowing them to control the data, branding, and the customer while Shopify gets a simple fee.

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There are two fundamental business models. A company can sell a product for more than the cost of production. Otherwise, companies can offer subsidized products to sell customer attention and behavioral data. Most digital industries will bifurcate along this divide. Android phones offer a great product for low upfront costs but at the cost of privacy, while iOS offers a luxury privacy-conserving product for premium margins. These models will become increasingly incompatible as privacy becomes a core issue. Apple could give up its $12 billion a year contract to make Google the default search engine and develop a competitor. Similarly, Shopify leveraged exploitation by Amazon to offer a simple product to sellers. Sellers control the data, branding and the customer while Shopify gets a simple fee.

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The monopoly algorithm

Five months into the pandemic, major American companies like ExxonMobil, Coca-Cola, JPMorgan Chase and Disney were down 30%. But Amazon, Google, Facebook, Apple and Microsoft were up 24% in mid-2020. These five companies make up 21% of the value of all publicly traded companies.

The flywheel model

Companies like Apple and Google leveraged the lead given by innovation to create effective monopolies. They did this by concealing their market position and exploiting outdated antitrust laws. Finally, they have a flywheel to grow revenue without increasing input or cost. Amazon Prime attracts shoppers who want rapid fulfillment. The subscribers enjoy Amazon Prime Video, which increases Amazon Prime's stickiness and time spent on the platform. This business model makes sense for Amazon as the Net Promoter Score is zero for eCommerce companies, but it is strong for streaming video. This revenue model, combined with a lack of antitrust action, has led to massive companies that turn entire industries into loss leaders for protecting their core business.

Questions and answers

How can the lessons from Apple's success be applied in today's business environment?

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The lessons from Apple's success can be applied in today's business environment in several ways. Firstly, Apple's success shows the importance of innovation and continuous product development. Businesses should strive to create products that are not only high-quality but also innovative and unique. Secondly, Apple's success in the wearables market demonstrates the value of diversification. Businesses should not limit themselves to one product or service but explore other areas where they can leverage their strengths. Lastly, Apple's 'Flywheel' strategy of connecting phones, watches, and headphones shows the power of creating an ecosystem of products that work seamlessly together. This can lead to increased customer loyalty and higher sales.

What are the actionable takeaways for entrepreneurs from Apple's success in the wearables market?

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Entrepreneurs can learn several lessons from Apple's success in the wearables market. Firstly, creating a connected ecosystem of products, like Apple's phones, watches, and headphones, can provide a competitive advantage. Secondly, dominating a niche market, as Apple has done with wearables, can lead to significant revenue. Lastly, constant innovation and high-quality products are key to maintaining market dominance.

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Similarly, Apple dominates wearables, becoming the largest watchmaker by a factor of four. Apple's wearables business generated $20 billion in 2019, making it one of the 20 most valuable firms in the world. Apple has created a Flywheel of connecting phones, watches and headphones, an advantage Rolex or Bose cannot compete against.

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From industries to features

Tech turns entire industries into features. Amazon has turned the delivery industry into a Prime feature. Amazon has leveraged its online penetration into 82% of American households to beat FedEx.

With hundreds of billions of dollars in value and massive cultural influence, media is being "featurized." Media firms like Comcast, AT&T and Verizon will bleed value to Apple and Amazon, to whom it is not a core business. Between January 2019 and February 2020, Apple and Amazon added Disney, AT&T/Time Warner, Fox, Netflix, Comcast, Viacom, MGM, Discovery and Lionsgate to their market capitalization. Media has become a customer acquisition vehicle, not a standalone business.

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In the context of "Post Corona: From Crisis to Opportunity", what opportunities and threats do Big Tech firms face in the post-pandemic business environment?

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In the post-pandemic business environment, Big Tech firms face both opportunities and threats. The opportunities lie in the acceleration of digital trends and the need for digital solutions in various sectors. The pandemic has highlighted the importance of digital infrastructure, and Big Tech firms are well-positioned to provide solutions in areas like remote work, online education, telehealth, and e-commerce. However, they also face threats. The size of these firms can create problems. Investors' high expectations can lead to pressure to constantly grow and enter new markets, which can be challenging. Additionally, increased scrutiny and potential regulation from governments around the world pose a significant threat.

How might the dominance of Big Tech firms impact sectors like Education, Healthcare, Life Insurance and Education?

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The dominance of Big Tech firms in sectors like Education, Healthcare, Life Insurance, and Education could lead to significant changes. They could leverage their vast resources and technological expertise to innovate and disrupt these sectors. For instance, in Education, they could introduce advanced learning platforms that personalize education for each student. In Healthcare, they could use AI and data analysis to improve diagnostics and patient care. In Life Insurance, they could use data to more accurately assess risk and set premiums. However, their entry into these sectors could also lead to concerns about data privacy and monopolistic practices.

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Size problems

Size creates its own problems for Big Tech firms. Investors expect them to add nearly a trillion dollars to their revenue over five years. They have to enter new markets and compete with each other. There are only a few sectors large enough for this appetite: Education, Healthcare, Life Insurance and Education.

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In the post-corona business environment, what opportunities might exist for companies to emulate Amazon's strategies?

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In the post-corona business environment, companies can emulate Amazon's strategies by turning their expense lines into revenue lines. This can be achieved by leveraging their scale and capital to build superior capabilities in their respective sectors, similar to how Amazon built its data center management capabilities. Then, they can monetize these capabilities by offering them as services to other companies. Another strategy is to take advantage of the increased online activity and launch a marketplace or platform model, similar to Amazon Marketplace.

How does the Amazon Marketplace contribute to the dominance of Big Tech?

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Amazon Marketplace contributes to the dominance of Big Tech by leveraging Amazon's scale and capital. Amazon uses its massive data center volumes and its ability to invest nearly unlimited capital to build top-notch data center management capabilities. It then sells these services to other companies through Amazon Web Services. Similarly, Amazon uses its warehouse and distribution capabilities to support the Marketplace, allowing other businesses to sell their products on its platform. This strategy turns Amazon's expenses into revenue streams, reinforcing its dominance in the tech industry.

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Turn expense lines into revenue lines

Amazon's killer move is to turn expense lines into revenue lines using scale and ultra-cheap capital. Amazon took advantage of its massive data center volumes and its ability to invest nearly unlimited capital to build the best data center management capabilities. Then Amazon turns it around and sells it to other companies through Amazon Web Services. Amazon did the same thing with warehouse and distribution and launched Amazon Marketplace.

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Amazon will likely foray into healthcare, leveraging its massive customer insights to disrupt a bloated and much-reviled industry like insurance. It could also move to reduce the financial cost of healthcare by providing telemedicine services through Alexa. Amazon's healthcare platform could integrate with its retail, pharmacy and wearables platform for a "holistic approach" to health. The opportunity is open as the pandemic removed regulatory bottlenecks to telemedicine.

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The trillion dollar DNA

The T Algorithm lists the eight essential elements for a company to have a shot at a trillion-dollar valuation.

Appealing to human instinct

The most potent firms target the "brain, the heart, or the genitals" of a customer. Rational claims appeal to the brain. Brands that target knowledge (Google) or rational claims of value like Dell tend to have small margins. Brands that target the heart exploit the instinct to care for our own. Facebook appeals to the heart exploiting our need to connect to our friends and family. Luxury brands leverage the instinct to improve our sex appeal to sell products that make us feel more successful and good-looking.

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How has Tesla's business model influenced corporate strategies in the automotive industry?

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Tesla's business model has significantly influenced corporate strategies in the automotive industry. The company's approach of vertical integration, selling cars directly to consumers, has challenged the traditional dealership model. Tesla's focus on electric vehicles and sustainable energy has also pushed other automakers to invest in similar technologies. Furthermore, Tesla's emphasis on innovation and high-quality products has set a new standard in the industry, forcing competitors to improve their offerings. Lastly, Tesla's successful use of storytelling and branding to appeal to consumers' desires and self-perception has demonstrated the power of strong marketing strategies.

What are the broader implications of Tesla's success for the automotive industry?

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Tesla's success has several broader implications for the automotive industry. Firstly, it has proven that electric vehicles (EVs) can be both desirable and profitable, challenging the traditional reliance on internal combustion engines. Secondly, Tesla's vertical integration and direct-to-consumer sales model could inspire other automakers to rethink their supply chains and sales strategies. Lastly, Tesla's emphasis on technology and innovation, particularly in areas like autonomous driving, sets a new standard for the industry, pushing other automakers to invest more heavily in these areas.

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• Career Accelerant: A company seen as a potent career accelerant attracts top-notch talent leading to higher innovation and greater success.
• Balancing Growth and Margins: Usually, fast-growing firms sell high volumes of low-margin products while luxury brands sell high-margin products at low volumes. Only a few firms can combine both.
• Bundle: A bundle of goods and services that create recurring revenue.
• Vertical Integration: This is a firm's ability to control the end-consumer experience by controlling most of the value chain. Apple controls end-user experience through controlling both the iPhone and the App Store.
• Benjamin Button Products: Unlike traditional products like cars, some digital products become more valuable with time. Facebook and Spotify become more valuable over time as the number of users increases the richness of personalization and data profiling.
• Visionary Storytelling: The ability to demonstrate progress against a bold vision motivates employees and attracts cheap capital.
• Likeability: The ability to insulate a firm from media and government scrutiny and create positive brand associations in customers' minds.

Tesla

Elon Musk's vision, storytelling and far better products have provided cheap capital that other players can't beat. The firm is vertically integrated, selling cars directly. However, its core advantage is appealing to "sexual instinct" through every aspect of its strategy. Owning a Tesla is the ultimate status symbol indicating that the owner is wealthy with a conscience. Further, it makes its customers perceive themselves as innovators and visionary rebels.

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Spotify

With recurring revenue and a "Benjamin Button" product, Spotify has all the ingredients of a trillion-dollar firm. However, it has a valuation of just $47 billion. Apple Music has most of the music available on Spotify, along with the advantage of vertical integration. If Spotify and Netflix merge and acquire Sonos for vertical integration, they could control video and music and establish devices in America's wealthiest homes.

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How can the lessons from the book be applied to the business of education in today's environment?

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The lessons from the book can be applied to the business of education in today's environment by recognizing the accelerated trends due to the pandemic. Institutions need to understand their value proposition. Schools with low acceptance rates and exceptional credentials, or those offering solid education at a great price, will thrive. However, those offering an elite-like experience at premium prices without strong credentials may struggle. Institutions should focus on enhancing their educational value and credentials, and consider adjusting their pricing models.

What are the key takeaways from the book 'Post Corona: From Crisis to Opportunity' for the education sector?

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The book 'Post Corona: From Crisis to Opportunity' suggests that the pandemic has given most educational institutions a fiscal shock. Schools with low acceptance rates and exceptional credentials, like Harvard, will be fine. Schools that offer solid education at a great price without an emphasis on experience will also survive. However, schools that offer an elite-like experience at premium prices without strong credentials will face challenges. The pandemic will accelerate every trend by a decade and redefine entire industries, including education.

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Disrupting higher education

In the past 40 years, college tuition has increased 1400% without any remarkable value addition or innovation. Premium universities have leveraged scarcity(low admission rates) to increase prices. These price rises have been enabled by federally subsidized student loans, leading to a total student loan debt of $1.6 trillion. In 2012, Clayton Christensen predicted that 25% of colleges and universities would go out of business over the next ten to fifteen years. By 2018, he raised the number to 50% pre-Covid.

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What insights does "Post Corona: From Crisis to Opportunity" provide into how the pandemic has influenced corporate strategies or business models?

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Post Corona: From Crisis to Opportunity" provides insights into how the pandemic has accelerated trends and reshaped industries. The book suggests that there is no going back to the previous normal. It predicts that iconic old brands will die, industries will consolidate, and newer innovators like Tesla will see their fortunes rise. The pandemic has fast-forwarded decades in one year, influencing corporate strategies and business models to adapt to the new normal.

How can a small business use the key topics covered in Post Corona: From Crisis to Opportunity to grow?

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A small business can use the key topics covered in the book to grow by understanding and adapting to the changes brought about by the pandemic. This includes recognizing that there is no going back to the previous normal and being prepared for the reshaping of entire industries. The business should be ready for the death of old brands and the rise of new innovators. It should also be open to consolidation and the acceleration of trends. By understanding these changes, a small business can position itself to take advantage of new opportunities and grow.

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In exchange for time and tuition, a college offers a credential, education and the college experience. The pandemic gave most institutions a fiscal shock. Schools like Harvard that have low acceptance rates and offer exceptional credentials will be fine. So will schools that offer solid education at a great price without an emphasis on experience. However, schools that offer an elite-like experience at premium prices without credentials will face the heat.

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Online education holds tremendous potential as it can scale. Top professors and administrators in the top 10 universities will see classroom sizes expand and revenues rise. Almost everyone else in academia will make less. The most significant disruption could be Big Tech firms partnering with academia to offer 80% of a traditional four-year degree at 50% of the cost. MIT and Google could offer joint 2-year STEM degrees, enrolling 100,00 students at $25,000 per year in tuition, yielding $5 billion for a two-year program. In August 2020, Google began offering courses with career certificates that it and other participating employers will consider equivalent to a four-year degree in that domain.

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There is no going back to the previous normal. This pandemic will reshape entire industries, and the way we work and learn will change. Iconic old brands will die, industries will consolidate, and newer innovators like Tesla will see their fortunes rise. The world has fast-forwarded decades in one year.

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