Welcome to the 21st Century
How To Plan For The Post-Covid Future
How To Plan For The Post-Covid Future
May 27th, 2020
The 20th century didn’t really begin in the year 1900, it began in 1914, when the assassination of Austrian Archduke Ferdinand triggered long-simmering international tensions and the world slid, seemingly inexorably, into a great world war, followed by a roaring return to seeming normality and then a crash into a decade-long worldwide depression and another catastrophic war. Empires were dissolved, an entire way of life swept away. A new, more prosperous world emerged only through the process of rebuilding a society that had been torn down to its foundations.
So too, when we look back, we will understand that the 21st century truly began this year, when the COVID19 pandemic took hold. We are entering the century of being blindsided by things that we have been warned about for decades but never took seriously enough to prepare for, the century of lurching from crisis to crisis until, at last, we shake ourselves from the illusion that our world will go back to the comfortable way it was and begin the process of rebuilding our society from the ground up.
Even when we develop a successful COVID19 vaccine or treatment, or when we achieve herd immunity, this will not be the last pandemic. Other long-predicted but “unexpected” crises lurk in the wings: flooding, drought, mass migrations, food shortages, and wars as a result of climate change; widespread antibiotic resistance due to overuse on factory farms; political instability driven by an unsustainable level of economic inequality; crumbling infrastructure and lack of investment in bettering the lives of ordinary citizens at the expense of a feverish Ponzi economy focused on growing asset values for the wealthy.
So, when you read stories—and there are many—speculating or predicting when and how we will return to “normal”, discount them heavily. The future will not be like the past. The comfortable Victorian and Georgian world complete with grand country houses, a globe-spanning British empire, and lords and commoners each knowing their place, was swept away by the events that began in the summer of 1914 (and that with Britain on the “winning” side of both world wars.) So too, our comfortable “American century” of conspicuous consumer consumption, global tourism, and ever-increasing stock and home prices may be gone forever.
That statement may be read as the dark view of a doomsayer. Far from it. Rather, I’m suggesting that we are at an inflection point. The choices our societies make now can have an enormous impact on the course of the next few decades. I think often of the difference between what happened after the two world wars of the 20th century. After the first great war, the winners bankrupted the losers, making them pay reparations and buying themselves an all-too-brief return to “normal,” only to have the illusion shattered by the Great Depression and another global conflict. After World War II, the victors lifted up the vanquished, helped them rebuild, and created the longest period of peace and prosperity in Europe since the end of the Roman Empire.
We face a similar set of choices today. World leaders and their policy advisers can wait decades to learn the lesson, like the people of the early 20th century did, or we can rise more quickly to the occasion and start building for a changed world now. We can build back things just the way they were, including the ways that didn’t work so well, or we can, as the disaster response community likes to say, “build back better.” We can try to protect the past from the future, or we can embrace the changes and use the opportunity to fix things that have been broken. We can surf the waves of change rather than being swept away by them.
Our failure to make deep, systemic changes after the financial collapse of 2009, and our choice instead to spend the last decade cutting taxes and spending profusely to prop up financial markets while ignoring deep, underlying problems has only made responding to the current crisis that much more difficult. Our failure to build back creatively and productively from the global financial crisis is necessary context for the challenge to do so now.
“My best-case scenario for what's going on now is—assuming that within the next half year, we do deal successfully with the COVID crisis—that it will become a model for people all around the world recognizing common problems, rallying together to deal with [them]. My best-case scenario is that, having defeated COVID, we will go on to attempt to defeat and succeed in defeating climate change...Worst-case scenario is that countries try to deal one by one. There's already talk of a race to produce vaccines, where a country that has the vaccine will use the vaccine for itself in order to gain advantage rather than spreading it around the world.”
The choices we make in response to this crisis can lead to very different outcomes.
Those of us in business also have difficult choices to make. And those choices have to be made with wildly uncertain futures in mind. We can no longer base our strategies on the old baselines of predictable consumer demand, globalization, office life and business travel, access to talent, credit, or venture funding. How then are we to plan and to budget? Even with the long view of history, we have little to guide us day to day, month to month, year to year. As former Secretary of Defense Donald Rumsfeld famously said, “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.” And, I might add, the current crisis reminds us that perhaps the worst of all are “ignored knowns”—things we know but pretend we don’t, and are then surprised when they trip us up.
Fortunately, there is a strategic discipline called scenario planning that is designed precisely to address this kind of uncertainty. Scenario planning takes for granted that it is hard for human beings to imagine the future as being radically different from the present. As a result, its practitioners don’t try to predict what will happen, but to stretch the mind to think about what might happen. Peter Schwartz, one of the originators of the technique, wrote in the introduction to his book about it, The Art of the Long View, the scenario is “a vehicle . . . for an imaginative leap into the future.”
In a traditional scenario planning exercise, participants are asked to identify key uncertainties that may influence the direction of their specific business or situation. Faced with a panoply of risks, they choose a few that are most relevant to their own operations, typically along two axes. For example, executives at a not-yet-profitable startup might choose as their two axes the state of the economy as it affects their target customers, and the state of VC and bank funding as it affects their ability to raise additional funds they need to execute.
For learning more about how to do scenario planning, I’m fond of a Wired article from 1995 by Lawrence Wilkinson, who worked with Peter Schwartz for many years and who consulted with O’Reilly on the strategy for our online platform a decade after that. Peter’s book is of course the canonical resource. There is also a treatment in my own book WTF? What’s the Future and Why It’s Up To Us. I won’t go into scenario planning in detail here, and I’m playing fast and loose with some of its ideas. Your key takeaway should be that by separating the receptive imagination from the quest for certainty, it is possible to prepare for a wide variety of unknown futures, to imagine how you might respond, and to make plans that hold up across a range of possible outcomes.
So, while you may hope for a return to normal, and plan for that as one of your scenarios, it is worth taking the time to think through what you might do were the world we knew to be swept away as surely as the 19th century certainties were swept away by the events of the early 20th century.
Imagine what has already changed during the pandemic, and may never come back. Imagine what else might cascade from those changes. Consider alternative outcomes. Some of them will be threats to current businesses; others will be opportunities and accelerations of existing technology trends. Here is a short list to get you started, but the possibilities are endless. Keep in mind that many of these suggestions are meant to be extreme. The point is to stretch your thinking, not to predict the actual future.
Travel. Imagine a world in which mandatory quarantines on either end make international travel a commitment of months rather than days. Gone are the days of jetting thousands of miles around the world for a quick holiday or business trip. Airlines go bankrupt, and service remains severely reduced. Tourism, one of the world’s largest industries, providing 1 in 10 jobs worldwide, is gutted. Travel becomes increasingly virtual, much like it was in the glory days of global exploration, with dispatches from faraway places now not delivered in talks at the Explorer’s Club, but on YouTube or in virtual reality. But also imagine that, as one article in Seeking Alpha argued recently, airlines are severely undervalued because of the crisis and their stocks will come roaring back along with the passengers. In either scenario, note that fortunes are likely made on disease monitoring equipment for airports and public spaces as disease supplants terrorism as what science-fiction writer Frank Herbert once called “our daily devil.”
In person events and entertainment. Imagine theme parks like Disneyland gone. Baseball, football, basketball, and Nascar events held in big arenas gone. Imagine sports games played in empty arenas for video and virtual reality consumption only. Imagine that today’s sports heroes go the way of silent film stars, replaced by new stars and new online-native sports. First-run movies targeted for Netflix and Amazon rather than theater chains? Perhaps a stopgap measure—filming live action movies may be curtailed or become even more expensive, drying up supply for years to come. Animation may rule, and accelerate us into an AI-generated entertainment future in which most movies are created with deep fakes and special effects. Perhaps it’s also a new golden age of amateur entertainment and artistic creativity, with social media storms bringing celebrity and money to unlikely new stars. Or maybe next year we’re back munching popcorn in front of the big screen. As you consider each possibility, ask yourself what else might be true in that future.
Privacy. Privacy was already on its way out in the face of what Shoshana Zuboff calls “surveillance capitalism,” but the pandemic may be its death-knell. Imagine that if you test positive for COVID, your phone shares the name of everyone you spent more than five minutes with in the past two weeks. Imagine mandatory quarantine enforced by sensors, as is already happening in China. Imagine both the upside and the downside of health sensors everywhere. How does more perfect knowledge change the insurance business, which relies on statistical averages? How might the privacy-invading infrastructure of contact tracing persist after the pandemic, and how else might it be used or misused? Alternatively, imagine that we’ve successfully built a privacy infrastructure that can alert individuals and their doctor without sharing the data with anyone else.
Health care. Imagine that our healthcare system is overwhelmed, and service levels never recover. Imagine that it is made stronger and more effective as a result of being tested. Imagine that healthcare is rationed. Imagine that this is finally the breakthrough moment for Medicare for All and the end of health insurance as we know it in the US.
Offices and work-from-home. What if many professional jobs migrate to distributed and online, and offices are never the primary work location again? What if the value of the commercial real-estate sector crashes, and with it, the downtown residential real-estate boom. The tyranny of having to be in “Silicon Valley” is broken, and new “remote-native” firms emerge to take advantage of the talent that is to be found everywhere. Companies holding onto their old business models and not retraining their teams to work in a distributed, remote, highly digital world fade away.
Schooling. What if the adoption of remote online education accelerates? What if the school schedule as we knew it never resumes? At best, school schedules are staggered, and the bundling of education and childcare represented by our current schooling system breaks down. (What happens to a generation of kids who have missed out on a couple of years of socialization?) Access to great teaching online increases dissatisfaction with the poor quality of many local schools, leading to a deep rethinking of the system, or does it lead to an even deeper bifurcation in the inequality of educational opportunity? Many colleges go bankrupt, and online learning companies flourish? Universities and teachers’ unions file lawsuits and lobby for licensing of online instructors as a way of slowing their ascendance?
Jobs and the economy. What if the COVID-19 recession cascades into a long, deep depression? What if the stock market loses its euphoric disconnect from the underlying “real” economy and experiences a massive crash. Some countries weather it better than others, and this increases their geopolitical power. Or, either the wisdom of the market or enlightened fiscal and industrial policy helps direct investment to companies that are driving positive change. There is a long boom for companies that invest in the right new opportunities.
If you are a student of history, you know that the massive reduction of the workforce in post-Black Death Europe forced lords to give better terms of tenure—serfdom all but disappeared, and the rise of a mercantile middle class set the stage for the artistic and scientific progress of the Renaissance. Temporary, but catastrophic, events often usher in permanent economic changes. Sometimes the changes appear to be reversed but it just takes time for them to stick. World War II brought women into the workforce, and then victory ushered them back out. But the wine of opportunity, once tasted, was not left undrunk forever.
Politics and government. What if government services fail even more strikingly than they did in the early days of the pandemic, increasing distrust of government? Or what if government services go online, becoming as available, effective, and easy-to-use as the best consumer applications?
Imagine that economic dislocations accelerate political dislocations; governments fall and are replaced by entirely new systems. There are international conflicts. Or there is a new era of international cooperation. What if US elections are postponed or canceled? Or vote-by-mail becomes universal, and there is increased voter participation? Or political participation is suppressed in some states and countries and not in others? What if we re-embrace expertise, or we go further down the path of disinformation and spin? What if we see chaos embraced for political advantage, or we see visionary, mission-driven leadership that pulls us forward and solves lurking problems whose consequences potentially far exceed even this pandemic and attendant economic meltdown?
International relations. This article is US-centric, but the pandemic is worldwide. How will it affect globalization and the balance of power? Asian countries seem to have responded to the crisis more effectively than the US and Europe. Will economic historians mark May 2020 as the beginning of the Asian century, as David Goldman asks? How might that affect the prospects for the way the world works, along multiple dimensions?
Though the list in the last section contains many dire possibilities, remember that through all the tumult of the early 20th century, technological progress continued apace. It was the century of antibiotics, the internal combustion engine, automobiles, airplanes, the electric grid and universal telephone service, motion pictures, radio, and television ushering in a new entertainment economy, iconic skyscrapers and suspension bridges demonstrating previously unimaginable feats of applied engineering, the atomic and hydrogen bombs, the moon landing and the international space station, golden rice, container shipping, communications satellites, computers, and the internet.
It was also the century of vast public works projects: hydroelectric dams, the Manhattan Project, the interstate highway system, the space program. Social security, Medicare, the 40-hour work week, and vast government-backed lending programs that made single-family home ownership part of the American dream.
In short, while many things that were taken as certainties were swept away, there has been enormous progress, and people all around the world emerged from the crises of the first half of the century more prosperous, with higher life expectancy, and better off in hundreds of ways.
So in your scenarios, imagine flying cars and robot taxis, if you like, or further significant advances towards Artificial General Intelligence (or at the very least, significant impact of AI on the economy.) Imagine biotech and agriculture advances. Imagine breakthroughs in medicine. Imagine investments in vast new public works programs—or the contrary, the failure of some countries to make those investments and so slide into irrelevance, while others go boldly into the future and take the mantle of leadership. Imagine new forms of governance and international cooperation. Imagine a more inclusive economy. (That last link is to a manifesto, written in Dutch, that those of us who don’t speak that language can read through the modern miracle of automated AI-enabled translation.)
Now using the lessons of history, imagine the second order effects of recent and future inventions. The automobile restructured cities, relegated railroads (one of the great technological innovations of the 19th century) almost to irrelevance (at least in the US). Cheap air travel enabled tourism and transformed warfare. Container shipping was a key enabler of globalization. The wide adoption of the elevator enabled the skyscrapers of the 20th century. Antibiotics turned many diseases from killers into inconveniences but also enabled factory farming of pigs, cows, and chickens, where overuse leading to resistant bacteria is now threatening to end their power to treat human disease. What unexpected directions might new inventions and the solutions to today’s problems take us in? What skills might these developments require?
Once you’ve let loose your imagination, observe the world around you and watch for what scenario planners sometimes call “news from the future”—data points that tell you that the world is trending in the direction of one or another of your imagined scenarios. As with any scatter plot, data points are all over the map, but when you gather enough of them, you can start to see the trend line emerge.
Because there are often many factors pushing or pulling in different directions, it’s useful to think of these trends as vectors—quantities that can only be fully described by both a magnitude and a direction—and that can be summed or multiplied to get a sense of how they might cancel, amplify, or redirect the pathway to possible futures.
If you think of trends as vectors, new data points can be seen as extending and thickening the trendlines and showing whether they are accelerating or decelerating. And as you see how trend lines affect each other, or that new ones need to be added, you can continually update your scenarios (or as those familiar with Bayesian statistics might put it, you can revise your priors.) This can be a relatively unconscious process. Once you’ve built mental models of the world as it might be, the news that you read will slot into place and either reinforce or dismantle your imagined future.
For example, to understand whether a trend like work-from-home is becoming the start of a new normal, sometimes the trend just hits you in the face. First Twitter, then Facebook announcing a commitment to new work from home policies even after the crisis is an obvious sign. But to see whether they are putting their money where their mouth is, and how many companies are following in the footsteps, you might look to see whether the salary premium for high tech workers in top metros like the Bay Area is declining as more companies are freer to hire wherever talent can be found. You might see job listings from bellwether companies that target new metro areas or ignore location entirely. Drops in the price or occupancy rate of commercial real estate, and how that spills over into residential real estate might add or subtract from the vector. You might also just look at your own workforce. How have they adapted? Do they look forward to returning to the office? How much is this dependent on factors such as how they get to work? Can they walk or bike, do they drive, or do they rely on public transportation?
Take the time to think through possible follow-on effects to whatever trends you’re paying attention to. For example, what are the second-order consequences of a broader embrace of the work-from-home experience? Your scenarios might include the possible emptying out of dense cities dependent on public transportation and movement from mega-cities to suburbs, or to smaller cities. As Derek Thompson wrote in The Atlantic, “The song of American urbanization plays on the accordion,” as changing fortunes and events drive people into and out of city centers. Depending on who your workers and your customers are, these changes could have an enormous impact on your business.
What are some of the vectors you might want to watch? And what are examples of news from the future along those trend lines?
The progress of the pandemic itself: Are cases and deaths increasing or declining? Is the pandemic recurring in locations that seemed to have succeeded in suppressing it?
If you’re in the US, the site CovidActNow is a great site for tracking the progression of the pandemic. It shows disease prevalence and acceleration or deceleration down to the county-by-county level. Right now, trendlines seem to be showing that the pandemic is slowly getting under control in areas that have followed strong shelter-in-place and social distancing practices. States and counties are beginning to think about loosening shelter-in-place ordinances, though. A data point pushing in the other direction is the disturbing news that Wuhan, where the pandemic began and whose aggressive response seemed to have defeated the disease, reopened and saw its first new cases within a month. This suggests that pandemic response won’t be a “once and done” strategy, but more like what Tomas Pueyo described in his essay “The Hammer and the Dance,” in which countries drop the hammer to reduce cases, re-open their economies, see recurrences, and have to drop the hammer again, with the response increasingly fine-grained and local as better data becomes available.
Seasonality and weather may also be a factor, which has enormous implications for whether the pandemic resumes even if we appear to be emerging from it. As we enter a period in which states and countries reopen, there should be a lot of new data that will shape all of our estimates of the future, albeit (even if the results are good) with new uncertainty about a possible resurgence in the fall.
Is there progress towards treatment or a vaccine? Again, there is positive news, with several vaccine candidates already in trials, and a few treatments being tested that seem to improve the prognosis for the disease. A vector pushing in the other direction is the discovery of previously missed symptoms or transmission factors, which remind us how little we understand. And there are disturbing reports that the virus is already mutating, which may make a vaccine harder to achieve, and which may also mean that even people who’ve survived the disease may get it again. We may be living with uncertainty for a long time to come; any strategy involving a “return to normal” needs to be held very loosely.
How do people respond as shutdowns are lifted? There is already data that suggests that economic activity dropped even before shelter-in-place mandates were issued and won’t resume just because governments release their lockdown orders. Will the shift to increased e-commerce and take-out dining even from top-tier restaurants stick? Will more people continue to walk and ride bikes, bake bread at home, and grow their own vegetables? (This may vary from country to country. People in Europe still treasure their garden allotments 70 years after the end of the Second World War, but US victory gardens were a passing thing.) Will businesses have the confidence to hire again? More importantly, will consumers have the confidence to spend again? What percentage of businesses that have shut down will be able to reopen? Are people being rehired and unemployment rates going down? Or are we settling in for what The Economist calls “The 90% Economy” (which doesn’t sound too bad when you read the headline, but would actually represent the biggest economic decline in over 70 years.)
Regardless of the absolute magnitude of the economic recovery, whatever comes back is likely to be irretrievably changed. Ben Evans wrote a wonderful piece recently about how sometimes the writing is on the wall, but we don’t read it. It was the end of the road for Blackberry the moment the iPhone was introduced; it just took four years for the story to play out. The same was true of digital cameras, though first digital replaced Polaroid, then point and shoot, and then high-end film cameras, in a series of waves. And sometimes, a seemingly unrelated shock accelerates a long due collapse. Print advertising was already in decline in 2009, but it fell off a cliff during the post-financial crisis recession, and never recovered. What came roaring back was digital advertising.
Just so, e-commerce has been growing its share for years, but this may be the moment when the balance tips and much in-person retail never comes back. So too with the work from home movement. As Evans put it,
“A bunch of industries look like candidates to get a decade of inevitability in a week.”
Are there meaningful policy innovations that are catching on? Researchers in Israel have proposed a model for business reopening in which people work four day shifts followed by ten days off in lockdown. Their calculations suggest that this would lower transmissibility of the virus almost as well as full lockdown policies, but allow people in many more occupations to get back to work, and many more businesses to reopen. Might experiments like this lead to permanent changes in work or schooling schedules? Might there be other long-discussed changes aimed more directly at the public, like Universal Basic Income, or a shorter work week? You can go to town with scenarios in this area, and those scenarios really can stretch your receptivity to signals that the world is tilting in a new and unexpected direction. How will governments pay for the cost of the crisis, and what will the economic consequences be? There are those, like Ray Dalio, who think that printing money to pay for the crisis actually solves a long-standing debt crisis that was about to crash down on us in any case. Others disagree.
Are business models sustainable under the new conditions? Many businesses, airlines, for instance, are geared very tightly to full occupancy. If planes have to be run with half as many passengers, will flights ever be cheap enough to attract the level of passengers we have today? The same question might be asked of many eat-in restaurants, whose cost structures are based on being able to maintain a particular level of usage. And of course, arena sports, theme parks, and the like suffer from the same problem. And Uber and Lyft were already unable to achieve profitability because they were subsidizing low prices for passengers. Might “on demand” transportation have been a chimera and go away forever? Or might these companies be replaced as the model evolves, much as AOL yielded online leadership to Yahoo! which lost it in turn to Google? (My bet is that algorithmic, on-demand business models are still in their infancy.)
Of course, these are topics that are all over the news. You can’t escape them, but you can and should form your own assessment of the deeper story behind them and its relevance to your strategy. What vectors does the accumulation of news stories describe? If you absorb as much news as you can, and think of the stories as clustering along lines with magnitude and direction, do they start to show patterns?
More importantly, find vectors specific to your business that become sources of what investors call “alpha”—excess returns when compared to a benchmark index or average. The market segments that are helped or hurt by these vectors may call for deep changes to your strategy.
While some segments that were previous Silicon Valley darlings, like on-demand transportation and lodging have been hit hard, others like on-demand food service are booming. Cloud computing, streaming performance, new sources of big data and better tools to manage it, are in higher demand than ever.
In making this determination, it’s important to remember that contrarian investments can also bring outsized returns. So it may be that there are markets that you believe in, where you think you can make a positive difference for your customers despite their struggles, and go long. Also keep in mind that the best time to buy market share is when it is cheap. For O’Reilly, this has been true of so many technologies where we placed early bets against what seemed overwhelming odds of success. Chasing what is “hot” puts you in the midst of ferocious competition. Thinking deeply about who needs you and your products and how you can truly help your customers is the basis for a far more robust strategy.
"Tactics is what you do when there is something to do; strategy is what you do when there is nothing to do." - Polish chess master Savielly Tartakower
One of my favorite ideas from scenario planning is that what you’re looking for is a “robust strategy,” one that will hold up well against a range of possible outcomes. Given that the future is not likely to match any one of your scenarios too closely, your goal is to decide what actions you can take now that will position you best whichever way things turn out.
Lawrence Wilkinson commented to me, “This current environment is a reminder that while ‘robust,’ certainly means flexibility, adaptability, bias to learning, et al., it also means ‘resilience.’ One of the implications of scenario work that's often hardest to get implemented is the need to sacrifice at least some efficiency to create slack, the elbowroom with which to respond to whichever of the futures emerges… that is to say, the capacity to be effective.”
A robust strategy has to take your own resources and time horizon into account. For example, I was talking recently to one software entrepreneur in the big data space. His pre-COVID goal was to get a larger percentage of the company’s revenue from software licenses than from services, because VCs, possible acquirers, and public markets value recurring SaaS revenue far more highly than they value services revenue. But with uncertainty about the continued availability of future VC funding that favors fast profitless growth, he was concluding that having a higher percentage of services delivering cash flow and profits could be a more robust business for right now.
This was music to my ears, because one of my own long-time strategic biases has been to choose markets where time is an ally, not an enemy, and that seems particularly appropriate in times like these. As former venture capitalist (and O’Reilly board member) Bill Janeway has often told me, “corporate happiness is positive cash flow.” Rather than blitzscaling profitless growth in an attempt to get the stock market valuation that comes from being #1 or #2 in a winner-takes-all market, at O’Reilly we’ve chosen instead to emulate the tortoise not the hare, growing our business surely and steadily with revenue and cash flow from customers.
Even in our venture investing, we’ve applied this strategy. Over the past five years, Bryce Roberts, my partner at O’Reilly AlphaTech Ventures, has been running a project called indie.vc, which focuses on profitable, cash-generating businesses rather than betting on high growth and a quick exit (although it turns out the two are not at all exclusive.)
If you are at a venture-backed startup and aren’t considering a scenario in which valuations are going to tumble and layoffs reach dotcom-bust levels or worse, you aren’t thinking boldly enough. In many future scenarios, venture backed companies without revenues that are depending on acquisition or exit are likely to end up out of business or at best as acquihire exits.
If you’re in business, a strong balance sheet is robust. Solving real problems and delivering true value to customers who need what you have to offer is robust. Equipping yourself and your employees with the knowledge, skills, and mindset to respond flexibly and quickly to new challenges is robust. Knowing how to pivot from what you used to do that no longer works and go all-in on new opportunities is robust. Finding new allies and cooperating with them to achieve big goals is more robust than winner-takes-all competition.
Embrace the future, not the past.
“The blunders are all there on the board, waiting to be made.” - Savielly Tartakower again
The COVID-19 pandemic has exposed the weaknesses of much that was previously taken for granted. Our marvelous, globalized, interconnected, just-in-time economy has been discovered to be fragile. With companies optimizing for financial efficiency rather than resilience, supply chain disruptions propagated quickly and have been hard to recover from. From parts shortages for iPhones to food rotting in the fields at the same time as people go hungry to big companies needing bailouts after decades of draining their capital to fund stock buybacks, it is clear that something has to change.
Encouraging people to borrow money so they can buy things they don’t need is not robust. Creating products that are designed to be thrown away after a few uses rather than treasured and handed down is not robust. Selling people products that harm them is not robust.
While economists have warned for years that one person’s spending is another’s income and that relentlessly cutting wages would one day lead to economic collapse, we’ve now seen a dramatic demonstration of the way that workers and consumers are one and the same. As Eric Liu and Nick Hanauer wrote almost a decade ago, we are reminded that “we are all better off when we are all better off.” The disconnect between the stock market and the economy for the average person has rarely been clearer. It’s time to stop pretending that what’s good for Wall Street is good for America.
In retrospect, the kind of pro-social commitments that businesses made in the post World War II period are looking more robust than the focus on driving corporate profits and share price valuations ever higher. When companies are rooted in their communities, when we invest in R&D and in making things, when we invest in training our workers and pay generous wages and benefits so that workers and their families can enjoy a middle class lifestyle, our companies are also stronger. The postwar period has its modern echo in the B-Corp movement; watch whether more companies turn away from shareholder value as their guiding star and embrace a more holistic view of their place in society.
So too, the crisis has reminded us that we need a government that is able to step up, that acts as a deep reservoir of foresight and investment. We need to stop hollowing out our capability for collective action; we need to stop pretending that the market left to itself can best solve every problem. As economist Mariana Mazzucato urges us, we must rediscover public purpose.
Now that we have tens of millions of Americans out of work and an economy that may be spiraling into depression, a far more robust strategy for the country as a whole might well include radical policy changes that address the weaknesses that COVID-19 has revealed. We urgently need a strengthening of the social safety net, and simply shoveling out money to companies and waiting for “the market” to do the right thing will be insufficient.
If people can’t go back to work at their old jobs, what new work needs doing? If enough companies are gutted by the shutdown, we may need the government to kickstart the economic cycle by acting as the source of visionary leadership, a customer for the products of business, and an employer of last resort, much as it has done in previous dislocations of this magnitude. Hundreds of thousands of people may be needed to help with contact tracing; alternative housing must be found for people who don’t have the space to self-isolate; if our seniors are the most vulnerable to the pandemic, people who have survived the disease may find new roles as caregivers; but beyond that, government can put people to work rebuilding our crumbling infrastructure and investing ahead of future crises.
But keep in mind that there’s more than one way to do it. Zeynep Tufekci’s recent piece about Hong Kong’s success against the pandemic makes the case that it has been based not on top down leadership by the government, but by a bottom-up self-organized movement rooted in the anti-government protests of 2019. For those of us who think that the issues of governance are “above our pay grade” and best left to others, this is a reminder that disconnection and apathy are not robust. In the end, government is what we agree to do together. It is a mechanism for cooperation at scale. Tufekci describes a new kind of self-governing Hong Kong rising to meet the crisis, and that may be one of the most hopeful bits of news from the future we’ve seen so far.
But what are we to turn our energies to once the immediate needs of taking care of each other during the pandemic have been met?
As Jared Diamond suggested in the quotation at the start of this piece, perhaps our most robust strategy for restarting our economy (and to building the next generation of great business fortunes) is to turn our attention to the looming challenge of climate change. In a forthcoming book, Saul Griffith makes a compelling case that responding to that crisis is also perhaps the most robust answer to this one:
“Pandemics, great depressions, wars—all require unusual levels of economic stimulus and creativity. There are only a few projects that are large enough to warrant the amount of stimulus needed to cope with economic emergencies at this grand scale. Building the infrastructure for addressing climate change is just such a project, perhaps the only project big enough to bring the U.S., and the world, back to work and prosperity post COVID–19. Let’s kill two birds with one stone; the stimulus required to bounce back from COVID–19 should be directed at building a 21st–century climate change infrastructure for the biggest pandemic of all.”
Economist Carlota Perez has suggested that if we do just that, we can be at the beginning of a new golden age of innovation and prosperity. Let’s not even try to get back to the old normal! If we rise to meet the crises of the 21st century, our future can be better than our past!
Tim O’Reilly has a history of convening conversations that reshape the computer industry. If you’ve heard the term “open source software” or “web 2.0”, he’s had a hand in framing each of those big ideas. He is the founder, CEO, and Chairman of O’Reilly Media.See Tim's interviews & articles