| | Trusted by over 100,000 blockchain investors. |
|
One of the many mystifying parts of this pandemic is: why are we running out of toilet paper?
It’s not like people are using the toilet more frequently, right? The typical answer is that people are panic-buying toilet paper, erecting giant fortresses of toilet paper in their basements and sheds. But even after stores limited sales to two packs per customer, toilet paper is still sold out.
The answer is supply chains.
Yes, supply chains, the thing that no one cared about just six months ago, and everyone now appreciates so much. (You don’t miss supply chains ‘til the shelves run dry.)
There are two markets for toilet paper: residential and commercial. The commercial product, as we all know from our time in Starbucks bathrooms, is sold on bigger rolls, and it’s generally terrible. It gets manufactured on different lines, stacked on larger shipping pallets, delivered on different trucks. It’s bought and sold through different channels. Two different toilet papers; two different supply chains.
When people are home 24/7, they are going to use more toilet paper, so there’s a crushing demand on the residential supply chain, and very little demand on the commercial supply chain. Here’s the poop: people are using more toilet paper at home, and almost none at work.
Rule of thumb: Whenever you see shortages, it is rarely because there’s a problem with supply. It’s usually a problem with the supply chain.
Supply chains are causing all these weird and unpredictable shortages. For example, all my grocery stores are sold out of tofu. Of all the food shortages during a pandemic, I would think tofu would be at the very end of the list. Tofu would be the emergency food after people had eaten all the sauerkraut and drank the last of the sour cream. The reason? Tofu supply chain.
As an investor, if only you could have seen the toilet paper shortage coming! The good news is, there’s still time. When it comes to our supply chain problems, this may be the very beginning of the roll.
When Will This End? This is the question on everyone’s mind, but timelines are hard to predict. Still, we can make some approximate guesses, combining past pandemics with current technology trends, and be “roughly right.” (As many economists have said, it’s better to be roughly right than exactly wrong.)
In my view, we’re still early in this drama. There are likely three great acts to the pandemic:
- Act 1: Slowing the spread
- Act 2: Testing and New Normal
- Act 3: Vaccine and recovery
We are still in Act 1. In all likelihood, the movie’s not over until the end of Act 3, which involves a) finding the vaccine, b) producing the vaccine, and c) convincing everyone to get the vaccine.
The vaccine is the key. Then we can roll the credits on the CoronaCrisis, and begin the sequel called the #GreatRecovery. Again, it’s tough to predict timelines. Most vaccines take five to eight years to develop, but experts think we could have a vaccine in about 12 to 18 months. There are promising developments that may get us a vaccine even faster than that, but … supply chain!
We’ve got to get the vaccine produced in massive quantities, faster than anything that’s been attempted before, to every corner of the globe. That is a massive supply chain challenge. In many ways, the vaccine is like toilet paper -- everyone needs it -- but far more complicated and difficult to produce.
One solution is to decentralize it: make the vaccine open-source and royalty-free, then allow a decentralized network of local producers to create and distribute it. This certainly seems better for the future of humankind than if Pfizer patents it. |
|
Best case scenario: we’ve got an open-source vaccine, and we’ve got a way to quickly produce it at scale, using local manufacturers (who should be planning now). Then comes the problem of distribution: we’ve still got to get the vaccine to hospitals and healthcare workers. We need the supply chain. |
|
Let’s say that Cambridge, Massachusetts – where you can't swing Schrodinger’s cat without hitting a biotech firm – is able to produce vast quantities of the CoronaVaccine. We’ve got to get those vaccines from Cambridge to Atlanta, and Minneapolis, and Detroit, and on and on.
But the problem is much more complicated. The vaccines need syringes. The syringes need springs. There is this entire network of parts and supplies that need to be produced, a complicated ballet of buyers and suppliers working behind the scenes.
This is the vaccine supply chain, and smart people are thinking about it now. Because it’s way more than the vaccine: it’s also the antibody test, which (if we find one that works) will tell us who is safe to restart society. As the recession wears on, it may be basic essentials like food -- and, yes, even toilet paper.
It’s all about the supply chain. And here’s where blockchain comes in.
Blockchain: It Even Sounds Like Supply Chain
Imagine one big, shared, Google Sheet that lists all the critical healthcare supplies. |
|
That’s the vision in one sentence. People have criticized blockchain as being a “solution in search of a problem,” but here’s a massive problem, and blockchain is the perfect solution.
Of course, you can’t literally use Google Sheets to track vaccines: it’s not built for sharing on a global scale. I can’t even share Google Sheets with two team members before everyone adds colors to all the rows and makes it unreadable. |
|
All Google Sheets eventually devolve into chaos.
If we don’t find a global solution -- and fast -- then everyone’s going to create their own patchwork quilt of solutions, and we’ll end up with a sea of useless Google Sheets. It will be the same mess we’ve had with masks, and respirators, and tests.
This is our chance to get it right. But we need to act now.
This week we got a demo from the IBM Blockchain team, which just rolled out a new blockchain-based solution called Rapid Supplier Connect. |
|
Courtesy IBM.
The simple way to think of this is like a giant eBay for emergency supplies. It’s a huge marketplace with buyers on one side (think hospitals and governments) and suppliers on the other (masks and gowns now, vaccines later). Unlike eBay, suppliers are carefully screened, with their info stored on blockchain.
IBM moved with remarkable speed and agility to build this solution, especially given the size of the company. Whether their solution saves the day depends on how many governments, companies, and healthcare organizations they can sign up, and how quickly they can do it. Like any marketplace, as you get more buyers and more suppliers, you get more traction, and then you’re eBay.
Wyoming doesn’t have to use the IBM solution. Wyoming could build its own marketplace. But why would it build another eBay?
Plus, there are benefits to Wyoming joining the largest marketplace. Wyoming suppliers will now have a national market for their goods, which is good for the Wyoming economy. States that move first will be first to reap the rewards.
Again, IBM’s supply chain solution may not win. But if not IBM, then who?
The Blockchain Investor Takeaway
Take a fresh look at IBM’s stock price. |
|
IBM stock hit a high back in 2013, and has been on a slow decline ever since. Warren Buffett famously bought a chunk of IBM in 2011 – an unusual tech investment for the investor who usually likes to buy ketchup and ice cream – then sold his entire stake in 2018, leaving many pessimistic investors feeling the company’s glory days were behind it.
If you do decide to invest in IBM, this is not a short-term play. But we are not in a short-term pandemic.
The problems caused by Coronavirus are going to be with us for years, and there will be magnificent solutions that spring into shape. Supply chain is one of our biggest problems, and humanity needs a solution.
Think about who’s got the technology tools to solve the supply chain problem, plus relationships with the companies and governments who can make it happen.
If not IBM, then who?
Health, wealth, and happiness, |
|
John Hargrave Publisher Bitcoin Market Journal |
|
Hi Everyone,
There's always that one guy who pipes up in a room crowded with people and says something that makes you completely reassess what you've just said.
It happens for me that way anyway, and it seems I'm not alone. Over the weekend, feel free to check out this podcast where two Bloomberg anchors are interviewed by The Block's Frank Chaparro. I really like the way Tracy explained the role of social media, where you can not only share ideas, but use it as a platform to formulate opinions. I do that a lot.
For example, the decoupling is something that I've been anticipating for quite a while. Not that bitcoin and the stock markets are extremely correlated, but they have been at their highest correlation on record for the last two months. So when I finally saw a breakaway between bitcoin and the Dow Jones industrial average, I couldn't help but tweet out a chart.
Of course the tweet was well received by my followers who are probably just as eager as myself for bitcoin's uncorrelated nature to return, but then there was that one guy who piped up and said something like "you should probably be comparing to the Nasdaq instead" and I thought.... damnit!
He's completely right. As an emerging technology, bitcoin's close relation with the stock market should probably be equated with the tech sector. So, let's take a look at that chart comparing bitcoin (orange) with the Nasdaq 100 (blue). |
|
Sure, bitcoin sold off harder and is making a stronger recovery, but directional wise and performance wise, they still seem pretty darn correlated at this time. |
|
Decoupled Economy
Where we have seen a complete decoupling, however, is between the U.S. economy and the U.S. stock market. Today, a historic figure was published confirming that 20.5 million people have lost their jobs already, and the unemployment rate has gone from a 50-year low to the highest levels since the Great Depression. |
|
All this, and the stock market has barely flinched. The Dow Jones fluctuated approximately 20 points at the time of the news, and as of this writing, is little changed at all. Even though this is the exact scenario that we laid out in Wednesday's episode of the QE Newsletter and I correctly hypothesized that the markets would have a little reaction to the data today, I'm still having trouble digesting what just happened.
If, as analysts are saying, this news is already priced in, then why is the Nasdaq already positive on the year and the other major indices not far behind?? It doesn't make any sense. How can the stock market be this disconnected from what's happening in the underlying economy??? It flies in the face of logic.
Even if you want to enter a fantasy-land reality and tell yourself that some sectors are immune to COVID-19, like tech for example, you must consider, or at least the thought must enter your brain, that Amazon's customers might have trouble buying stuff if they don't have a job. Or Facebook's monetization per user is going to plummet if people aren't able to spend money.
Of course, we're not likely to find out about those particular details until Q2 earnings season, which isn't for another three months, and by then, with any luck, the economy will be back on track. |
|
Monday Night
To find out more about bitcoin's decoupling from the stock market and how it might play out, come check out this recent interview on Thompson Reuters:
Block 630,000 is currently scheduled to usher in bitcoin's third ever halving event on Monday night, or thereabouts. Have a fantastic weekend!! |
|
Mati Greenspan Analysis, Advisory Money Management |
|
|
|
|
|
|
