We must, I’m told, plan for the future, as if some other period of time might seem more worth planning for.
Right now, the future most business managers are planning for is next week, or, for the more visionary, next month. This is as it should be. Many businesses are in the metaphorical emergency room, where stopping the arterial bleeding gets priority over curing a long-term illness like cancer.
And yet …
The decisions executives and managers make today should be informed by their view of what’s in store once the immediate crisis has passed. To that end, and because I really wanted to write science fiction, and because there’s still only one Subject worth writing about, here are some thoughts about the post-crisis future and how it should influence the decisions business leaders are making here in the self-isolated present.
In round numbers, when SARS-CoV-2 eventually recedes from view (in case you haven’t kept track, SARS-CoV-2 is the virus, COVID-19 is the disease it causes, and coronavirus is the family of viruses SARS-CoV-2 belongs to), I see three major competing What Happens Next scenarios. Call them Survivalism, Normalism, and Transformationism.
One at a time:
Survivalists are going to pivot from a dystopian future in which nuclear war has wiped out much of our societal infrastructure and norms to the same dystopian future only with a pandemic as the cause. Self-reliance (including a strong immune system) will matter more, social adroitness will matter less; the adjective of choice will be “grim”; and living off the grid will be less isolating than expected because those choosing the survivalist lifestyle will experience an influx of new, like-minded neighbors.
Business survivalism puts us in Great Depression territory, where dramatically reduced commerce leads to greatly reduced personal income, wealth, and spending, which leads to a vicious cycle of even more dramatically reduced commerce.
Survivalist business leaders expect a slow, protracted recovery. They should reduce their workforce to the numbers needed to supply a much smaller marketplace.
Their strategies will be pseudo-Maslowist, figuring most spending will be for needs, with wants and desires a distant second and third, too miniscule to be worth catering to. Probably they’re already adjusting their products and services catalog to fit.
For Normalists the current pandemic is a temporary disruption. They need strategies to get through the next few months, not to adapt to changes to societal fundamentals.
And while nobody has ever deliberately turned off the economics motor before, normalists are confident we’ll all figure out how to re-start it once we can stop dealing with the threat of contagion.
Business normalists should be thinking about the best ways to ride things out so they can ramp up quickly once the recovery starts. This means furloughing employees rather than laying them off, converting others from full-time to part-time status, renegotiating services contracts and licenses, optimizing raw-materials inventories based on a post-recovery demand forecast, and figuring out how to quiesce production facilities now so they can be re-started with as little delay as possible then.
Normalists should also include a chapter 11 contingency in their plans. (Expectation: massive use of the chapter 11 mechanism will help the economy recover by sharing out pandemic-induced economic damage, not that I have any serious expertise in such matters.)
Transformationists? They figure the pandemic will accelerate trends we were going to have to come to grips with anyway, the most important of which is the decreasing need to employ human beings to do all of the work that has to get done. The second most important is that consumers, and especially younger consumers, want more experiences and less stuff. That’s fine if you’re in the entertainment business or are a tourism destination, although the future of cruise lines is debatable.
But even if you’re Disney you rely on retail revenue along with the theme park entry fee.
Those who figure the past prefigures the future will explain that all previous waves of technology have created more jobs than they destroyed. Although the transitions were painful, the new jobs did appear.
But increasingly capable machine learning and robotics mean fewer and fewer humans will be needed to create the stuff retail outlets will be selling less of.
Transformationist business leaders should be doubling down right now on the investments they’ve already been making in artificial intelligence and robotics. They should also, right now, start to re-conceptualize their businesses in terms of how they fit into a less-stuff/more experiences consumer marketplace.
Meanwhile, transformationist savants will start thinking about how to configure an economy so that people don’t need to work to make their lives work.
And not only an economy, but a society and culture, too.
Also for transformationists: Even on a more modest scale, lots of businesses are proving to the powers-that-be that remote working really does work adequately for more positions than they wanted to admit. The lost employee productivity that comes from not having an eye on everyone in their cubicles may be offset by the reduced real estate square footage that companies discover they can get by with.
I know that’s a process that’s been ongoing, but this may dramatically accelerate the use of telework across any number of industries.
The Survivalists and Normalists of any era have given way to the Transformationists. I doubt any major firm will not now codify clear and definitive responses to another pandemic, or any other situation that necessitates remote work. The question should be “How substantial *will* the economic transformation be?” With some European countries pledging to implement UBI, and the idea becoming more well-known to Americans, it seems that all economists are thinking about how to configure an economy so that people don’t need to work to make their lives work.
Let’s hope the Normalists are right.
Much like polio, measles, mumps, and smallpox, current science suggests that covid 19 (I’m lazy) isn’t going anywhere, and that our final solution is a vaccine to give us a safe way to herd immunity, as it has been with other highly contagious and dangerous viruses.
The great advantage of the Normalists is that by furloughing most employees, our eco-dynamic will mostly be in place, when we have the tests we need and can insure everyone has spent 14 to 28 days in quarantine, and then been tested.
Only a national shelter in place makes this scenario possible.
At that point, we’ll know who is still at risk, and who is a risk to others, so we can gradually return most of the players to the field of economic battle.
What is extremely important is that the money supply should remain close to constant throughout this process of preserving and then gradually re-peopling the rest of the economy.
It’s the money supply we have to sustain to avoid a depression or even a recession.
I don’t know that we will a second chance, if we screw this up.