What Does the World Look Like After a Pandemic?
Taking a look at which industries could shift if the coronavirus’s impact is severe
Venture capitalists spend ample time thinking about the future. They are obligated to be ahead of the curve on various topics, from finance to healthcare to the future of work. This doesn’t always work out, and it should go without saying that most venture capitalists are not epidemiologists, although they may play one on Twitter. As the coronavirus formally known as COVID-19 continues to spread, many economists, business leaders and investors have speculated on how the virus could have long term effects on the way we do business and conduct our lives. I decided to gather my thoughts, look into my (very murky) crystal ball, and share how several industries might be changed, for better or worse, by a true pandemic.
The Economist published a piece in last week’s issue that outlines the thinking on long term economic change well. “In February 2014 a strike on the London Underground offered management theorists a lesson in resilience and adaptation. Because the shutdown closed some but not all Tube lines, frustrated Londoners were forced to rethink their commutes to and from work. Researchers at Oxford and Cambridge universities subsequently found that around 5% of passengers stuck to their new itineraries even after normal service resumed. The long-term economic gains of one in 20 travellers adopting new and improved ways to get to work turned out to be greater than the short-term costs of the disruption.” Much like the way some Americans continued to hunt for bargains long after the recession, some Londoners, when forced to change behavior, continued that behavior after the original impetus was gone. The long term effect was actually a net benefit. A pandemic that shifts American habits (were none of us really washing our hands!?) could accelerate technological and behavioral trends that are already underway.
Future of Work
Remote Work & Distributed Teams
This one is probably the most obvious, and was underway in some industries long before the virus. This trend also has some roots in the recession. As Rani Molla of Vox points out, “When the Great Recession hit back in 2008, many US companies downsized their office space to save money and began allowing, or even encouraging, employees to work from home. But what was born from necessity has stuck around long after the economy rebounded. It turned out that remote work has benefits besides cheaper office rent.”
In addition to the practical necessity brought on by recession, or a virus, technology has improved vastly since 2008 and distributed teams and collaborative work are easier than ever, through platforms like Trello, Slack and the Google Suite of services. In fact, Trello has an entire guide on how to embrace remote work. Many businesses may rely on close contact and communication, or may believe that working remotely would hurt employee productivity. However, again, circumstances produce results, and some companies may find that they can adapt much faster than they thought. Slack’s guide to remote work attributes a quote to authors Jason Fried and David Heinemeier Hansson, who wrote Remote: “You don’t need everyone physically together to create a strong culture. The best cultures derive from actions people actually take.“ We may see some companies, specifically in service focused industries like wealth management, real estate and law (and potentially VC), continue to embrace the changes brought on by contingency plans for a virus.
AI and Distributed/Remote Call Centers
Insurance companies, financial institutions, and many other large organizations employ hundreds of people to operate call centers. These centers have been shifting to automation and AI integration for some time, but a virus could accelerate that process. What will happen if the healthcare system is burdened by additional claims, and nobody is there to answer the phone? Claims automation is already a huge investment topic for corporate venture funds in this space and you’ve probably found it increasingly difficult to get someone on the phone through other services (AirBnb is notorious for this). In a true pandemic companies will make drastic changes to deal with additional demand. We’re also anticipating large upticks in critical illness claims, and innovative solutions are available. In China, companies found blockchain solutions to automatically process claims in a mobile first economy. According to the South China Morning Post, “[the mechanism] uses its blockchain network to speed up settlements and reduce fraud, and is available on Alipay, the predominant mobile payments app in China. The coronavirus payout will be funded with Ant Financial’s own capital, and is separate from the 300,000 yuan maximum payout Xiang Hu Bao participants are entitled to for another 100 critical illnesses.” This is a fascinating enterprise use case and could speed adoption in other markets.
Teleconferencing & IoT
We all had our first laggy, pixelated Skype call with a friend or relative long ago. Again, this isn’t new. However, technological innovations in streaming bandwidth, UX and quality have made teleconferencing mainstream. In our professional lives, from Skype, to Cisco, to Zoom, we’ve been talking to a face on a monitor for quite some time. Originally, like remote work, this solution was one borne of convenience. I need to interview you but I don’t want to fly you across the country. I need to hear your pitch but I don’t want to fly to you. In the age of enormous fear of human contact, we will continue to see this trend accelerate. In fact, investors are so keen on this trend that some piled into the wrong Zoom shares as a safe haven from market turbulence. As health officials continue to discourage large gatherings, and families worry about the vulnerability of elderly relatives, we may see increased adoption out of necessity, rather than convenience. In fact, Amazon was ahead of this trend when it released an ad in 2018 targeting families seeking to stay in touch. I’m not sure a “virtual Thanksgiving” is around the corner, and hopefully virus fears will have subsided by then, but given the effects of COVID-19, it’s not unfathomable.
Health Care
Telemedicine and Remote Patient Monitoring
The previous illustration is a great segway into the next area where necessity will push innovation forward. In the same thread as adoption of IoT and connected devices, telemedicine should see a rapid uptick from the virus. Healthcare workers are already especially at risk from contracting illnesses, and patients with mild symptoms are also put at risk when they have to visit an emergency room or hospital to get diagnosed. As a result, hospital workers must take extreme precautions when dealing with potentially life threatening illnesses like the coronavirus. Again, this trend isn’t new, and is already being utilized in cases with patients in remote areas, but adoption may increase for the safety of both patients and healthcare workers. Companies like Amazon’s Pillpack and those on this list from startup accelerator/early stage fund Plug & Play are poised to meet rising demand for medical-grade advice without the trip to the doctor (Aflac Ventures is a P&P Partner).
I wasn’t sure whether to separate the two, but Remote Patient Monitoring will also continue to grow as a vertical, to keep people out of contact with potentially hazardous health environments. In an environment where we can track your vitals from hundreds of miles away, there is no logical reason (other than cost, which will continue to fall) to require you to come into a doctor’s office to update vital signs or conduct basic tests. Since we’ve covered many of the benefits in the section on telemedicine, I’ll just point interested parties to this list from Business Insider on promising companies in the space. Again, both of these trends will continue to protect the most vulnerable population, which at this point seems to be the elderly and those with existing chronic conditions.
Future of Aging
Aging in Place
Unfortunately, the elderly seem particularly susceptible to the virus and as a result, places with the greatest density of older people seem very vulnerable. Cases of outbreaks in both a nursing home in Washington and New Orleans illustrate this problem. Since birth rates have been declining for some time and lifespans have been increasing for decades, we know that the elderly will make up an increasing portion of the population. Unless there are drastic reforms to the way healthcare works, the elderly will continue to live in senior living facilities, and incur large medical expenses towards the end of life. The industry of aging has been grappling with quality of care issues for years, and the system has become somewhat bifurcated into a medicare option and a “luxury option.” According to this JAMA Report, “Given the difficulties in saving money on end-of-life care, should efforts to change the care for these patients be abandoned? Not at all. The problem isn’t that such care is unworthy of focus; instead, we may be focusing on the wrong problem. The problem is less about wasteful spending and more about poor quality of care. We need to focus on providing high-quality, patient-centered care at the end of life.” If a virus devastates senior living care, we will see a dramatic increase in caregivers opting for “Aging in Place” services, to improve both quality of care, and avoidance of illness like a coronavirus. There’s some overlap with Telemedicine, but Motley Fool had a good piece on this in December.
Supply Chains
Last Mile 3D Printing
Initial fears of a pandemic in China were centered almost entirely around supply chain gaps and pauses in the epicenter, China. Globalism and free trade mean that supply chains are distributed all over the world, and thus any one link could slow down the entire chain. Components must travel great distances and be assembled into final product. At the same time, additive manufacturing, otherwise known as 3D printing, has dramatically improved. Companies are building large components with 3D printed parts, saving on costs, time and efficiency. However, until recently, raw materials were limited and most 3D printers could only handle basic resin, and in some cases carbon fiber. Now, as this article points out, “Major chemical companies are already working directly with 3D printer manufacturers to invent new resins, polymers and powdered metals to take manufacturing into a new era.” As a solution to pandemic supply chain disruptions, companies could set up emergency remote manufacturing facilities nearby to produce needed parts at a moment’s notice. This would obviously slow down some volume-based manufacturing processes, but it would not cripple the economy like a shutdown in China, whether due to a virus or trade war (or actual war).
“We grossly overestimate the length of the effect of misfortune on our lives. You think that the loss of your fortune or current position will be devastating, but you are probably wrong. More likely, you will adapt to anything, as you probably did after past misfortunes.”
Entertainment & Exercise
I was going to separate out Streaming, Gaming, and VR for live sports, but I believe they all fall under this umbrella. All major sports leagues in the United States are considering banning live attendance for a period of time to subdue the spread of COVID-19. Serie A shut down as Italy grappled with the effects of the spread of the virus. China’s CBA has been on hiatus as the virus slows, and is finally scheduled to restart April first. To be clear, it’s one thing to shut down, but another to play the games without fans, as some American leagues are contemplating. Virtual reality (VR) has struggled to find its place in the world since the term was first coined in the mid 1980s. Recently the invention of devices like the Oculus Rift have created new momentum.
For some time, professional sports leagues have been toying with use cases for virtual reality, usually as a supplemental experience As this this article notes, “One market that VR has seemingly cornered is the sports industry, with sports teams — particularly at the pro level — investing millions in VR sports technology mainly to improve and diversify the training methods of athletes. Such innovation is also being used in other areas, notably in sports coverage and fan engagement.” Typically use cases involve training and supplemented fan experiences, but in a world where fans aren’t allowed to attend, we could easily have a VR company dominate VR experiences in live sports through exclusive contracts with leagues. This wouldn’t nullify broadcasting rights, but could open up enormous new revenue channels. At the same time, e-sports has been exploding as an industry. Although in-person attendance to tournaments have driven interest, the industry could easily go back to its Twitch and streaming roots and produce revenue for top earners and teams.
VR and Remote Exercise
We’ve already seen Peloton’s shares rise as investors look for stability in volatile markets. There are other opportunities in the space, like interactive mirrors, that will change the way people work out at home. A pandemic will keep people away from the gym and we may see new technology emerge to meet a rising demand. Wii Fitness tried this several years ago but if people are forced to stay inside (and stay sane), expect this trend to accelerate.
Consolidation in Travel
One of the first signs of the severity of the effects of the coronavirus on travel was United Airlines’ decision to suspend 2020 guidance in February. One might hope that the recent oil price war would help airlines stay afloat, but lower fuel costs can only make up for so much lost revenue. The past decade has produced something of a golden age of travel post-recession, as huge startups like AirBNB and Oyo disrupted hotels and airlines enjoyed profitability from low fuel costs and relatively calm geopolitical conditions. Plug and Play assembled this list of startups to watch if you’re hoping for a quick rebound in the space. However, traditionally airlines have favored consolidation in difficult times, and some airlines in Europe and India were already failing before the coronavirus brought on additional pressure. Along the same lines, the hotel industry has been consolidating for some time due to both disruption, price inefficiencies and geographical expansion in new markets. Unfortunately, the lack of guests in the short term will likely put downward pressure on operators and accelerate the trend.
I’m sure there are many other opportunities that I haven’t thought of, and this list is by no means exhaustive. I’d love to hear your thoughts on what I’m missing, what I got right, and where I’m way off. Pandemics create incredible uncertainty. We haven’t quite reached peak coronavirus, but the lack of predictability produces both challenges and opportunities in business. Many in the tech community have begun to describe the advent of COVID-19 as the “Black Swan” of this cycle: an event we didn’t see coming that drastically changes our perspective and habits.
For Nassim Talib, the author of The Black Swan: The Impact of the Highly Improbable, these moments were immense opportunities. “We grossly overestimate the length of the effect of misfortune on our lives. You think that the loss of your fortune or current position will be devastating, but you are probably wrong. More likely, you will adapt to anything, as you probably did after past misfortunes.” For anyone looking for a bit of optimism in these times, I’d also point to Schumpeter, the proponent of creative destruction, an underlying force in entrepreneurship and the economy as a whole. Schumpeter describes creative destruction as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
We may experience some dark times as a result of this new pandemic, but we may also produce some incredible opportunities.
