Remember when Blockbuster was basically the king of Friday nights? Yeah, that didn’t age well. Netflix came along with their “hey, what if we just mail you DVDs?” idea, and suddenly those late fees seemed pretty ridiculous.
This is what economists call “creative destruction” – basically, new companies come along and make the old guard look like they’re still using flip phones. And with AI running wild right now, this process is happening faster than ever.
Here’s the thing: instead of mourning the corporate casualties, smart investors should be hunting for the next disruptors. But how do you spot them before everyone else catches on?
The Magic Word: Efficiency
Investment legend Eric Fry has a brilliantly simple test. When you’re looking at any company – whether it’s a hot new stock or something already in your portfolio – ask yourself two questions:
1. Is this company making things way more efficient than the current market leader?
2. Is this company using new tech to make their own operations more efficient?
If you get a “yes” to either question, you might have a winner. If you get “yes” to both? Jackpot.
Think about it – every company that’s ever dominated a market got there by doing something better, faster, or cheaper than everyone else.
The Ford Playbook
Take Henry Ford back in 1908. His first Model T cost $850 (that’s like $30,000 today – yikes). But then Ford figured out this whole assembly line thing, and by 1913, he was selling the same car for $440. By 1925? Just $260.
As prices dropped, sales exploded. Classic efficiency play.
Today’s Efficiency Champions
So what passes this test today? Corning Inc. (GLW) is a perfect example. They make fiber-optic components that dramatically boost data transmission in everything from data centers to your home internet. When AI needs to move massive amounts of data around, Corning’s tech makes it happen faster and more efficiently.
The beauty of this approach is that efficiency gains don’t always show up immediately in earnings reports. But eventually, they translate into expanding profit margins, growing market share, and rising revenues.
The Bottom Line
In a world where AI is reshaping entire industries overnight, the companies that survive and thrive will be the ones that either create new efficiencies or harness them better than anyone else.
The dinosaurs? They’re the ones still doing things the old way, wondering why their lunch is getting eaten by some startup they’ve never heard of.
So next time you’re evaluating an investment, skip the fancy financial models for a minute. Just ask those two simple questions about efficiency. Your portfolio will thank you.