reaching beyond the current crisis to imagine the[+]
Supply chains will be local rather than global. The tariff and trade wars
had stretched global supply chains to breaking point. The virus pandemic broke
those chains. Companies will be loathe to trust all the supply from one foreign
country or even from outside U.S. Companies will look to diversify their suppliers
and to favor local suppliers, even at higher costs.
Shop, work, and play online. Retailers with physical stores were already
struggling to compete with online shopping. The shelter-in-place rules forced
everyone to shop, work, or play online. As the last online laggards adjusted to online
commerce, they will likely not go back. So in-store shopping and commercial real
estate will take a hit long-term.
Digital divide will become a chasm. Everyone shifted to working and
learning online. Those with connectivity and technology jobs and skills could
continue working remotely fairly unaffected during the shelter in place order. Access
and ability to work online will become even more important and those who are
unable to connect online, will fall further behind economically.
Home-bias will increase dramatically. Economists have long known that
we perceive higher risk the further away the threat is from us. It’s the fear of the
unknown. Put it another way, we have a favorable bias and a perception of lower risk
for what’s closer to home. Investors pulled back from investing overseas or out-ofstate as travel was difficult during this crisis which prohibited proper due diligence.
Investors are likely to revert to more investing closer to home.
Healthcare for all becomes a more standard view. Before the crisis,
universal healthcare was still considered a left-of-center view. During the crisis, there
was unified view that free testing for all was critical in protecting everyone. As rich
and poor got afflicted, it became clear that we need a good health care system, for all.
Unemployment benefit is not just for the lazy. When unemployment was
at 3.9%, it was hard to get anyone to support unemployment benefits or minimum
wage. The perception was that only the lazy were unemployed or couldn’t support
themselves financially. With 3.3 million people applying for unemployment in one
week, it became clear that there are economic gyrations that impact large swathes of
people, regardless of their skills, abilities or work ethic. And not providing
unemployment benefit for these who are caught in the wrong place at the wrong
time, could crater the whole economy for all.
Loss of trust will take time to recover. How long will it take before folks
are comfortable going on a cruise again? Or when will homeowners feel comfortable
letting a stranger into their house to rent it for a weekend? How long before countries
with high infection rate will be deemed clear so their citizens can come visiting as
tourists again? It will take some time. My guess is 2 years or more.
Insurance takes center stage. In the past, businesses often viewed risk
mitigation and insurance as boring areas that reflected overly pessimistic views. This
incredible unimaginable crisis is unfolding and causing tremendous damage to every
sector every where in the world. Those who had contingency plans and robust risk
planning are really benefiting. Risk management will become a core activity in the
new world. Companies will actively develop and test contingency plans and look for
insurance services to protect themselves. Hedging will not be viewed as an
unpleasant cost but a wise necessity. Of course, insurance companies will also look to
protect themselves and tighten their exposure.
After any prolonged period of crisis, there is a strong desire for rebirth and renewal.
After a war, there is a post-war boom. The citizens of a country that has been at war
are weary of death and destruction and with peace comes a second chance at life and
a tremendous burst of creative energy and economy-building. There is pent-up
demand for products and services; folks are eager to get back to work and to invest
and to shop. Hopefully, that rebirth is also part of the new world.
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Suzy Taherian