The impact of COVID-19 on the economy and our lives has been the subject of a lot of discussions in the last several weeks. But there’s been less discussion of the potential long-term implications of how the virus—or something like it—may alter the longer-term trajectory of our society and economy.
Here are some big-picture considerations of how the new coronavirus, or something like it, may fundamentally and uniquely alter our highly connected, communication-dense and unevenly flexible world of 2020.
1) Downward pressure on the on-demand economy and a reversion to asset ownership and control
The short-term pressure on the “sharing economy” and marketplace of a shock like COVID are clear. In the longer term, people may think twice about moving fully away from asset ownership and control and trusting the open marketplace for things like cars, housing, office space and food.
There is the question of trust. Do you want to get into a car or stay in a vacation home when you don’t know who else has been in it recently? Do you want to order food that will be delivered through a long series of handoffs where you aren’t precisely sure about the chain of custody? Do you want to work out of a shared office space when people are getting sick?
There is also a question around guaranteed access. What is the premium you are willing to pay for exclusive use and control of transportation, housing and so on?
I strongly believe that sharing assets remains the future. You could imagine, however, that for a period we will see an uptick in car sales and a shift toward branded hotels. You could also see a world where the on-demand platforms need to invest even more heavily in systems to support the safe, clean and consistent operations of their services provided through third parties. This could be an opportunity for them. But it could also require an alteration of their business models if they have to take on more of the risks and guarantees associated with providing services.
2) Increase in desirability of full-time work versus participating in on-demand jobs and marketplaces
Shocks like COVID-19, of indefinite severity and length, are hard to manage if your livelihood is earned on demand. This is especially true if it is the case that many of the people who participate in these labor markets are living nearly paycheck to paycheck.
The flexibility for workers that on-demand work platforms provide is obvious. But if labor-market disruption caused by COVID-19 goes from a theoretical possibility to a reality, you could imagine that people suddenly will start placing a higher value on consistent full-time employment.
3) Broad flight toward job security with the best, most profitable companies
The best companies with the strongest balance sheets will clearly get through what we face today, as well as the pandemics of the future. However, I am personally worried about companies in less generous situations with high fixed costs.
And if a lot of companies in less defensible positions fail, large, well-positioned companies may gain more power in the labor markets as people start evaluating companies based on their ability to withstand shocks.
4) Broad exacerbation of inequality issues and social challenges
Setting aside medical risks, and speaking strictly in terms of the economy for well-off people, COVID-19 will likely be no more than a small blip. Asset prices are (at least so far) not even down that much. Knowledge workers who can continue to do their jobs from home will experience this largely as an inconvenience.
Less well-off people, however, who are paid hourly for in-person jobs by companies that cannot afford to float them through an episode like this, are going to be severely challenged. This will be especially true if they do not have savings.
To be sure, since we are a consumption-based economy, we are all in this together. If a lot of consumers end up financially upside down, everyone is affected. I can’t help but wonder if a COVID-like shock could have serious repercussions for the direction democracies take. Would a poorly timed epidemic draw us toward socialism?
There obviously have been shocks to the system before. But because knowledge workers today have real flexibility in being able to work remotely, unlike other workers, the impact of an epidemic in 2020 has the potential to be more unequal than a similar shock would have been a century ago.
5) Reorganization of government tactics for supporting people during a shock
So far, the government has cut interest rates to support the stock market. This, however, is a crude tool for keeping things working in a world where hourly workers are going to be most deeply affected.
What you want the government to be able to do is route money and support to the people and companies whom the epidemic most directly displaces.
In the world of physical disasters like hurricanes, we have agencies like FEMA to direct assistance to those impacted and in need. When you look at something like a pandemic, which is national and global but unevenly impacts different industries and people, how do we administer support more precisely? Dropping interest rates can’t be the answer.
6) A move toward a strong national identity, acceptance of increased state surveillance and border hardening
In times of crisis, the balance between privacy and security shifts. We saw this with September 11 in the U.S. I have heard that the Chinese have deployed some aggressive people-tracking technologies to handle COVID-19. A national health crisis could easily tip the U.S. and other countries toward dramatically strengthening national identification strategies and assuming the right to track people in detail for the sake of security.
This isn’t necessarily a bad thing in time of crisis. The question is, is it ever possible to roll back these steps? Or does the added control only grow over time?
7) Pressure toward digital voting, remote services, and drone and bot delivery
Imagine if we are in a position where we want broad swaths of people to stay home during an election cycle. This might propel a real demand for digital or remote voting and remote government service delivery. This will be especially true if we end up with a strong national identity.
A pandemic might similarly create a sense of urgency about regulation to open up drone airspace and bot delivery as we look for ways to deliver services remotely in both urban and rural environments.
8) Pressure to decentralize production facilities, knowledge work and education
Apple is obviously discussing this in practical terms right now. More broadly, you could see a world where supply chain diversification and fortification becomes a key scorecard for companies.
The same thing applies to knowledge work and education. Today some companies are clearly better set up to manage remote work than others based on both the nature of their work and their preparedness. The same goes for schools.
I would imagine that in the future organizations will start to think about their decentralization strategies or at least contingency plans, and will actively pursue more resilient approaches to work.
This is actually going to be a pretty interesting shift to pull off, and will require significant reorganization and rethinking of many core principles for all sorts of organizations. As just a single example, many customer service departments rely on having physical locations to maintain their security compliance. Moving to remote work for them doesn’t just mean installing some fancy new software—it means rethinking their entire approach to security.
9) Possible decline in desirability of cities and value of commercial real estate
Will cities become less desirable if they are harder hit because of higher transmission rates than in the suburbs or country? That was certainly the case before modern drugs allowed cities to be more livable. You could imagine a world where, just as companies and organizations look toward decentralization, there is pressure to “decentralize” communities away from inner cities entirely.
Similarly, if people start to ask questions about how they choose to use shared infrastructure and services, restaurants and so on, the relative value of living in cities will rapidly decline.
This, coupled with investment in remote work capabilities and so forth, could deal a major blow to the value of city living and commercial real estate.
10) Adoption of virtual reality, Peloton and so on
This is obvious but still needs to be said. In a world where quarantines grow, you can only assume that entertainment platforms, VR and home fitness categories will all significantly grow.
11) Shifts in event and media businesses
All of the media companies that currently rely on monetizing live events will have to evolve their business models or insure against monetary shocks. This could involve making all events a hybrid of physical and virtual. It could involve a shift toward subscription. It could involve new types of paid digital experiences. Regardless, it is clear that the live events business and the media companies it supports are going to change in some deep ways as a result of the risks around pandemic.
12) Shifts in who we trust and how we evaluate truth
It is hard to know whom to trust for good solid analysis and understanding of what is going on with COVID-19.
Do trustworthy paid journals like The Information need to be covering health? Do hedge funds need to evolve to do their own science and publish results, putting dollars transparently against their research? Do we need new government regulation and rating services as was the case in the Upton Sinclair era?
There has been a broad discussion for quite some time about how, in our era of mass communication, trust in reality is slipping away. It is interesting how visceral that starts to feel when we’re faced with something like a pandemic.
Conclusion
There have been scores of pandemics throughout human history, some very severe and some relatively mild.
The difference today is that we have a strange new mix of knowledge, communication and flexibility in how we work and live that we didn’t have before.
Setting aside the physical impact of the disease for a second, the reality is that if COVID-19 had happened a century ago, we likely wouldn’t have been talking about it at all until nearly everyone already had it (and many had already died or recovered).
Even if we had known about the disease, I question how socially disruptive it would have been, because everyone would still have had to go about their lives, go to work and so on.
There is some irony in the truth that our increased knowledge, communication bandwidth and flexibility to reorganize our lives rapidly is magnifying the social impact of COVID-19—in a way that would have been unimaginable historically.