Innovating Investor Options By Going Back to the Basics

Last month, Warren Buffett, writing in the New York Times, counseled investors to ”Be fearful when others are greedy, and be greedy when others are fearful. And most certainly,” Buffett continued, ”fear is now widespread, gripping even seasoned investors.”

Investors’ new-found caution is an important corrective in overheated markets flush with capital but short on solid, grounded analysis. The flipside, of course, is that opportunities missed during the “greedy phase” come into focus when events force a re-valuation of the market. That applies to investors and businesses alike, says Steve Prokesch in his Harvard Business Review article, Recession: The Mother of Invention? Writes Prokesch:

"I was astonished to learn how a number of enterprises outperformed competitors and actually grew during [the Great Depression] by excelling in understanding and satisfying customers’ changing needs… What lessons can managers glean from the 1930s? The main one, of course, is that the current wave of market upheavals and shifts are providing opportunities for innovations and growth."

One of the areas Prokesch highlights as ripe for innovation is the ability to bring products and services developed for emerging economies to serve newly-felt needs in mature economies. (I’ll set aside for another blog post a discussion of how investors can create value in mature economies by investing in emerging ones - lots to explore there.)

But RENEW’s approach to core services — the way we Find, Assess and Grow businesses in markets that are unaccustomed to thorough vetting – is itself an innovation, answering investors’ newly-felt need for rigorous, grounded analysis. As we work to establish RENEW’s Africa-based operations, our team in the field is designing systems and cultivating local networks that will reduce the cost of due diligence while improving its thoroughness.

RENEW’s focus on overlooked businesses in unfamiliar markets means that we must find value in the fundamentals of each business we evaluate. RENEW sees no substitute for face-to-face, hands-on analysis. In fact, our business is founded on the premise that global investors will not engage seriously with small and medium enterprises in emerging economies until the need for quality information and clear, timely communication with these businesses is met.

Our team sees the current economic downturn as an opportunity: the sooner investors in the West regain their focus on fundamentally solid businesses with significant potential to grow and change their communities for the better, the sooner these businesses will have a chance to prove their viability and gain the means to achieve their potential.