One of the most overused cliches often cited by motivational speakers and politicians, is that the Chinese character for crisis is also the same character for opportunity. JFK, while campaigning for the presidency of the United States, popularized this phrase in his speeches of 1959 and 1960 by saying:
“In the Chinese language, the word “crisis” is composed of two characters, one representing danger and the other, opportunity.”
When you question this quote one level deeper, you find out that our translation is actually not entirely accurate — the Chinese character representation, to be a bit more accurate, actually means “danger at a point of juncture” or “danger meeting a critical point”. But the western mistranslation and idea remains incredibly popular because it rings true in so many scenarios.
COVID-19 is out latest crisis that is teaching us that every crisis does offer disaster for some while opportunity for others. Gyms shuttered around the world but bike stores sold out of a year’s supply of bicycles in a month. Some retailers like JC Penney and Neiman Marcus declared bankruptcy while others such as Amazon and Walmart saw business surge beyond all expectations. Investors in airlines and cruises were hammered while investors in technologies that help people work productively from home offices skyrocketed. Clorox is having a banner year, as are many pharmaceutical firms, as are Glock and Smith & Wesson.
The lesson that I see, the lesson I’m committed to learning, is that the next time a crisis looms, I’m going to quickly gather my investment idea crew on a Zoom video call and brainstorm our best ideas for who will win and who will lose, if this new crisis grows. Had I moved faster than I did, I would have sold my airline and oil positions weeks sooner than I did, and bought obvious winners such as Zoom and Slack. It would have made a great difference in my results to be nimble and open-minded.
Do you have an investment-idea-crew built and connected, ready for next time? Why not?
The lesson is straightforward even if the Chinese character translation is nuanced and a bit mangled: One man’s crisis is indeed another man’s opportunity. Don’t spend brain-cycles worrying about the crisis — rather, quickly think through the opportunity that waits to be found. The market as a whole does not figure these things out in 24 hours.