By now, we’re all used to the idea of working from home.
Not that we’re all doing it, of course — even during the worst of the pandemic in 2020 (and in Victoria and Sydney in 2021, unfortunately), plenty of people still ‘went’ to work: our emergency services personnel, medical professionals, construction workers and retail staff among them — but a majority of us have had a taste of working away from the office over the past 18 months.
I’ve had more practice than most — since The Motley Fool opened in 2011, I’ve worked from home. And all of our team, across Australia, have worked from home at least some of the time since then.
As it happens, and maybe not surprisingly, given my experience, I’m a huge fan of workplace flexibility.
I’m much more productive at home than I ever was in an office, not to mention happier, because I get to work flexibly, have no travel time, and feel trusted and respected by my boss.
The alternative? As one mate told me, his boss wanted him and his colleagues in the office so he could keep an eye on them. How’s that for a workplace that builds morale and encourages discretionary effort? I couldn’t think of anything worse.
And, here’s the thing: in a world where the best people can pick and choose where they want to work, and for whom, which option do you reckon they’d take? And if they take the ‘flexible’ option, it stands to reason that the second-tier people will choose — or be stuck with — those ‘command and control’ bosses.
Now, as investors, let’s play it forward.
Do you want to invest in businesses that attract the best people, make them happy and give them room to do their best work? Or the nineteenth-century over-the-shoulder management mobs?
Me? If there was a way to buy the ‘flexible working’ group and short the ‘micromanagers’, I’d make that bet every day of the week and twice on Sundays.
Yes, there will be exceptions in each group. And of course some businesses require physical presence. I’m not talking about those.
But, taken as a group, I’m pretty sure I know who wins, over the long term.
And think about it… If your business model, hiring practices, culture or people require you to keep tabs on their every movement, that’s a pretty flimsy business.
In fact, I’d reckon you’re in the firing line — and maybe at the front of that line — for disruption.
In the old days, value was created one physical widget at a time: production lines, typing pools, bricks laid. Some of that still exists, in one form or another, of course.
But these days?
Value is created not by how much ‘stuff’ you do, but by how much benefit you create for someone else.
Think software. Branding. Marketing. Innovation.
The key difference: scalability of the best solution.
Zoom. Atlassian. Funds management. Yes, even YouTube and Instagram “influencers”.
You don’t have to like it, but, as an investor, you owe it to yourself to understand it.
And here’s a mental model to do it.
Remember, when we pick stocks, not every one will work out.
Our job — mine as well as yours — is to be right as often as we can. But — far more importantly — to make sure that the winners make more than the losers cost us.
And those are two different things.
See, some venture capital firms are right one or two times out of 20.
5% – 10% doesn’t sound like a great strike rate, but if you’re in the business of finding the next Facebook, Tesla or Google, it’s more than enough.
Now, I’m not saying you should only try to be right 5% of the time. My point is that, when you know the game you’re playing, you can set your strategy accordingly.
So, if you’re thinking ‘well, work-from-home might not work in Scenario A, B or C’, that’s fine. But don’t let the presence of a few counterexamples blind you to the bigger picture.
If you’re right on all three, but those are 5%, 10% or even 25% of workplaces, there’s somewhere between 75% and 95% of cases in which it does work.
Which is how we invest.
When we identify risks in an investment thesis, we ask ourselves ‘what can go wrong, and how likely is it?’
The honest answer is that there are possible circumstances that could destroy almost every company on the ASX. If we looked only for risk-free investments, we’d never invest a dollar.
And when some of those risks do come to pass, we might curse under our breaths, but that doesn’t necessarily make our approach wrong — because in more cases, those risks may not come to pass, and we might make a small fortune.
Here’s the simplest example: let’s say you have rigged a $1 coin so that it lands on heads 60% of the time.
If you’re given a 2-to-1 payout on heads, you should play that game all day long… and longer.
But remember, sometimes it’ll land on tails.
Does that mean the game isn’t worth playing?
Not a chance.
See what I’m saying?
Your job — our job — is to read the situation, ascertain the odds, and place our bets.
When the odds are good and/or the payoff is sufficiently attractive, we should make the bet.
Not because it’s guaranteed, but because, if we’re right, we’ll win more often than not, and the average win should be larger than the average loss.
Which takes me back to working from home.
Yes, some workers will slack off. Some bosses will suck at managing a team remotely. Some companies just won’t be cut out for it.
But, if you’re a manager, know that many in your team will happily change companies to one that offers more flexibility.
And, as an investor, it’s a reminder that the combination of culture and business model might just be one of the great differentiators in the twenty-first century.