It may be time to take a new look at the impact of coronavirus and the lockdown, since it appears (we all hope and pray) that things are starting to open up. I’ve been gathering information and running my models, and there are some interesting results. My data is US-centric, so unless I comment otherwise, this is a US view.
First, in a broad economic sense, the Fed and Congress have injected literally trillions of dollars into the economy to offset the loss of spending created by the lockdown. That injection would be expected to create moderate inflation when things pick up, but the biggest near-term impact will be to create a significant uptick in economic activity. It’s already starting slowly, and it will build through the third quarter to be obvious around late September.
The liquidity-induced uptick will not only increase commercial activity (sales), it will fuel the stock market to more than recover past highs. Stocks tend to do better in inflationary periods than bonds, and inflation also tends to devalue debt, which makes it easier for companies with a high debt load to manage it. However, interest rates are likely to rise in Q3, so whatever borrowing anyone plans to do should be done quickly.
In a technical sense, the changes focus on the impact of the lockdown itself. It’s been widely predicted that everything will move to robotics because robots don’t get viruses, but that’s not realistic. Yes, we can expect to see more industrial automation, but remember that if retail businesses are shut down and tens of millions are unemployed, there’s far less reason to be worried about keeping the production lines rolling. Robots might be able to produce goods, but selling to robot buyers isn’t a plan I’d want to take to my national sales manager.
What we can expect to see is a focus on improving virtual work, a general term I’m using here rather than “WFH”, because the goal is less to accommodate home workers than to accommodate distributed workplaces. Many companies are looking to shift their focus from massive headquarters or regional sites with huge staffs, to suburban locations. Not only would this get workers closer to home, it would get them closer to customers, and in any pandemic, concentrations of humans means a concentration of risk.
It’s hard to say how this will end up looking. I’ve kicked around this process for decades, and my own focus has been on what I called “jobspace”, which is the sum of the information, communications, and control that a worker must exercise to do their job. There was, in the original ExperiaSphere project, an entire section that related to jobspace management (with my usual love for whimsy, it was called “SocioPATH”, a term I trademarked). The point of a virtual workspace is to be able to assemble workers’ jobspaces wherever it’s convenient, and to make the result as productive (or even more productive) than being physically collected.
There will also likely be a permanent shift in entertainment. The lockdown forced people to seek at-home recreation, and our centerpiece in home recreation has always been TV/video. If you think about it, TV has always tried to fit into our not-at-work hours; “prime time” is the time when most people are home from work. When people were forced to either work from home or just stay home, there was less fixed work activity to fit things around, and so they were forced to find stuff to do/watch at odd times. This has expanded the value of on-demand content considerably, weaning some away from the “what’s on now?” viewing of the past.
Most people I talked with (who, remember, are tech workers and not the average people in the population) say that TV shows have declined in quality and interest, even before the pandemic. Most say it’s gotten worse, largely because shortened production seasons (and limits on concentrating the casts to shoot) make it harder to create content. The literally vast library of past popular material makes up for this, and many shows (including popular drama, comedy, and crime shows) are almost timeless in that they don’t jar us because they’ve been shot a decade or two ago.
In the long run, where we may see humans replaced more is in entertainment video. We already have very realistic virtual-reality productions and video games, and I expect that we’ll see an expansion in both areas and an attempt to combine the two into a successor concept for “live TV”. In that live-TV area, in fact, it’s very possible that only sports and news (mostly local news) will survive in as strong a form as they now have. Even new content is likely to be produced as an episode sequence released at one time (as Amazon and Hulu often do now) than as a weekly show.
What about business survival? It’s likely that retail storefronts are going to take a major hit, as people and sellers combine to redefine their shopping relationship. Many people have told me that they buy things online now that they’d never have considered for online purchasing before, mostly food and clothing. Could we see a “retail experience” more like an opportunity to “see” something to validate the purchase, then have it delivered? I think so. If this is true, then what does the place where we “see” goods look like? A kind of clothing-Home-Depot?
Small businesses are going to have a tough time, no matter what space they’re in. With limited access to capital and minimal cash reserves, those with higher fixed costs will surely have a problem, and Chapter 11 doesn’t work if there’s no feasible way to emerge. This will likely make retail real estate a problem area in the late summer, but new businesses will spring up to replace the old, and we can expect many to be franchises, which offer new “small business owners” an easier path to starting something up. Your old favorite dress shop or camera store may disappear, but another of the same kind of shop may spring up in its place.
The tech companies that will do best are the software companies and the public cloud providers. The lockdown (and the risk of future ones) is going to create massive shifts in how we work and shop. Functionality is the domain of software. The problems of having stranded capital assets is going to induce many companies to opt to shift more to the cloud, and to an expense-based realization of functionality. This doesn’t happen at the point of worker empowerment; the laptop, tablet, and smartphone area all safe. It will tend to shift spending from enterprise computing to cloud data centers, though.
These changes aren’t going to come about overnight. There will be a period of adjustment through the end of Q3, when everyone holds their breath that COVID-19 won’t surge again. If it does, then that will surely accelerate the changes I’ve noted, and even if it doesn’t, this isn’t going to be something we forget.
I remember my parents and grandparents talking about the Great Depression. We may be telling our descendants stories about the pandemic and lockdown for a long time, and its impact may stamp our lives and theirs, just as that earlier event stamped those of our ancestors. Just remember that our ancestors survived, and so will we.