Studying Industry Change

January 25, 2019

One of the most common ways that an investment can fail is what we call “industry change”. We spend a lot of time at Ewing Morris thinking about industry change and wanted to share an example.

One industry undergoing change is consumer products. Entry barriers are dramatically lower than they were 20 years ago. One reason that entry barriers are lower is the changing nature of advertising. Historically, the cost of a national TV campaign was high and relatively fixed. You can’t buy half a Super Bowl ad. Without access to the most important media of the day (i.e. TV), it was very difficult for small companies to compete. However, digital advertising provides small brands with access to the same media used by giants.

A recent article in Businessweek provides a great example.  In just six years, a corporate lawyer created the #4 ice cream brand in the U.S. using social media campaigns. This would have been nearly impossible 20 years ago.

By studying industry change, we attempt to both avoid mistakes and seek short selling opportunities.

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