Nothing lasts forever. This is especially true in the business world. Entrepreneurs and executives come and go, and industries and companies rise and fall. These dynamics are very much at the core of TKer Stock Market Truth No. 9: There’s a lot of turnover, says Sam Ro, editor of Tker.co.
Specifically, this observation concerns how stocks are regularly added to and removed from the market and the major indices. But philosophically, Truth No. 9 also speaks to the many changes that long-lasting businesses experience during their time as going concerns.
Earlier in April, the once-popular, now-flailing shoe brand Allbirds Inc. (BIRD) announced a major pivot to its business model. From the announcement: “The Company anticipates changing its name to “NewBird AI.”…NewBird AI’s long-term vision is to become a fully integrated GPU-as-a-Service (GPUaaS) and AI-native cloud solutions provider.”
Allbirds Inc. (BIRD)
People were quick to remember when the alcoholic beverage maker Long Island Iced Tea Corp. pivoted to blockchain and changed its name to Long Blockchain Corp. All this is to say, people — including me — have their doubts. It’s one thing to pivot to an adjacent business. It’s another thing to dive headfirst into an unrelated business that just happens to be hot right now.
That said, it’s not crazy for companies to make big changes to how they make money. Sometimes it happens gradually — think of Netflix Inc. (NFLX) becoming a streaming platform after starting as a DVD rental-by-mail business. Sometimes it happens through acquisitions — think of Berkshire Hathaway Inc. (BRK.B), which started as a textile company but bought its way into the insurance business.
Zooming out, leadership transitions and business pivots don’t always work out. But the companies that pull it off sometimes go on to become the largest and most successful enterprises in the world.
And it’s often the case that turnover in the stock market and the major market indices can be explained by whether or not a company was able to execute these transitions successfully.
All of this also makes investing in the stock market complicated and interesting. Who knows what businesses – and which business leaders – will be responsible for driving the market higher in the years to come?
