Shuffling through the crowds of Fourth of July weekend shoppers, I spied my prize. The farm stand’s rows were bursting with color—juicy strawberries, rich blueberries, and robust peaches. “Over here,” I called out to my kids to join me. We carefully selected handfuls from the overflowing baskets. Fresh berries would make a perfect addition to our family’s dessert that night.
When I approached the shop owner to pay, I had a brief moment of panic.
“Is it cash only?” I asked her.
“Nope,” she replied, revealing the white square hooked onto her phone. “We take credit cards now.” I breathed a sigh of relief as I handed her my card to swipe through the reader. She smiled and bagged our fruits, and I followed my kids on to the next stand.
Today’s customers want proximity
It would be difficult to stroll through a small-town market or other pop-up shop without seeing a Square reader. These recognizable contraptions, which now include contactless payments for cards, Apple Pay, and Google Pay, easily connect to mobile devices and empower small- and medium-sized business owners to accept credit and debit card payments on the spot.
No longer do merchants have to turn down sales because the buyer doesn’t have cash on hand. Square is a leader in digital payments, and its onsite and digital point-of-sale systems are part of a bigger trend that’s helping people purchase the goods and services they want exactly when and where they want them.
Today’s technologies have a human mission. Our mortal desires have always demanded instant gratification. Wants and needs arise, and we are driven to satisfy them as quickly as we can. The underlying concept, coined by my friend Rob Wolcott, is proximity—products and services produced and provided ever closer to the moment of demand in time and space. Square represents a proximity technology; it allows a business owner to cheaply and quickly set up a point-of-sale system on the spot at a weekend pop-up event.
If shoppers prefer to stay home, they can order from a small business online and receive their shipment in just a few days. It’s no surprise that the COVID-19 pandemic accelerated this trend. We’ve come to expect Amazon packages in mere hours. Food deliveries arrive within an hour at our doors. Our doctors and educators enter our homes through video cameras.
Enabled by technologies such as artificial intelligence, 3D printing, virtual reality, Internet of Things (IoT), self-driving cars, and 5G connectivity, proximity is occurring at an accelerated pace, and it’s going to continue to transform nearly all aspects of our lives.
Investors who focus on proximity outperform
Innovators and investors are paying attention to the rising trend. ARK Invest, founded in 2014 by technology analyst Cathie Wood, is a go-to source for trends and investment advice. They’ve experienced incredible returns by focusing on proximity technologies, though they don’t use that term. They seek companies advancing artificial intelligence, DNA sequencing, CRISPR gene editing, robotics, electric vehicles, energy storage, 3D printing, and blockchain technology. All of these have applications that drive the production and delivery of value closer to the point of demand. The firm manages exchange traded funds (ETFs) that outperformed the market and peers in 2020 by considerable margins.
Last week, Investor’s Business Daily released a list of six ARK Invest stocks to buy and watch (Coinbase, DraftKings, Square, Teladoc Health, Tesla, and Zoom Video); all of them are strongly linked to proximity technologies:
- Coinbase: Coinbase, an online platform for buying, selling, transferring, and storing cryptocurrencies, is bringing proximity to the financial services industry by cutting out middlemen. Digital currencies are gaining popularity because they shorten the distance between people and their financial investments. While banks have moved to online and mobile, cryptocurrencies have taken massive steps toward removing the central bank intermediary as well as leveling foreign currency exchange. Coinbase, a trusted blockchain wallet that allows exchanges between US dollar and crypto, also helps merchants to accept bitcoin as payments.
- DraftKings: The world’s first legal mobile sports betting app, DraftKings demonstrates the application of proximity in the gambling industry. No longer do players need to visit a casino, or coordinate via pen and paper at a bar to place their bets. From their phones, users can participate in fantasy sports leagues, play online casino games, and place bets on sports competitions.
- Square: As I mentioned earlier, Square is a digital payments (and, more recently, cryptocurrency) leader that not only shortens the distance between customers’ desires and their ownership of the solution but, more importantly, shortens proximity for business owners by allowing then to set up point-of-sale systems and process transactions rapidly online at the point of sale. Their focus on proximity is made evident by their mission to “shorten the distance between having an idea and making a living from it.” Owners can start, run, and scale their business. Consumers can easily pay businesses or friends and family—Square also owns Cash App.
- Teladoc Health: Teladoc Health is delivering proximity by cutting the distance between doctors and the patients they serve. The company is accelerating the adoption of virtual care by providing on-demand health care services online. Doctors and patients can communicate remotely through chat and virtual visits. Their solutions cover every aspect of health from wellness and prevention to acute care to complex healthcare cases.
- Tesla: Tesla continues to transform the auto industry by popularizing electric vehicles, pushing the boundaries of in-car entertainment options, and developing self-driving cars. With driverless technology, car owners and passengers will be able to get where they need to go without relying on public transportation, of-age drivers, or (for the nights out on the town) sobriety. Tesla’s software receives updates over-the air. The digital elements of value, such as repair (through software updates), model improvements (artificial intelligence is continuously learning, updates are repeatedly made), and entertainment choices are delivered to drivers’ cars at a more frequent rate than traditional automotive repairs. Instead of waiting a year for a new model, Tesla owners get improvements virtually.
- Zoom Video: Few people would have made it through the past year without participating in a Zoom call. Whether we are communicating with colleagues or family members, Zoom Video brings us closer to each other through its virtual teleconferencing services. Last year, it surpassed competitors by offering an easy-to-use way to connect from afar. Post-pandemic, it is still positioned for success now that many companies are establishing fully remote or hybrid work cultures.
Three steps to benefit from proximity
Whether you want to innovate or invest, seeking opportunities through the lens of proximity can provide clarity.
- Start by envisioning a point at which “P=0” in your industry: the state at which the moment a need emerges, the product or service is instantly produced and delivered.
- Then assess the gaps between the current state of things and that ideal P=0 state.
- Finally, select where you want to innovate to shorten one of the gaps or invest in companies that already are innovating to do so.