Thank You, Coronavirus
The fact that 2020 could predictably amount to a shitty year in history may account by the massive hoarding of toilet paper that took place at the beginning of the COVID-19 pandemic.
Jokes aside, we have argued in a prior article that even though the situation appears to be quite bad there are some positive aspects to the crisis as well. What are those and, more important, what lies ahead of us?
The Glass Is Always Half Empty
We should not diminish the fact that the economic loss has been enormous and we may be facing the biggest downturn since the financial crisis of 2008. It has been particularly destructive for those pursuing a policy of “getting big fast, no matter the cost” such as Softbank. It was recently announced that yet another investment, its $375 million bet on pizza making startup Zume went sour. And while Zume’s collapse — as well as the home-goods seller Brandless Inc., which announced its imminent shutdown on Feb. 10, less than two years after taking $100 million from SoftBank — hasn’t cost SoftBank’s nearly as much as the fund’s $4 billion investment in WeWork, its $100 billion Vision Fund has posted losses of 12.5 billion dollars with a -7% Net Equity IRR for its limited partners.
However as we saw in prior recessions entrepreneurial grit and resilience make sure that the relentless pace of innovation slows down but doesn’t stop, and a cohort of startups are jumping into the market to leverage the new opportunities. The proximity to the events may lead us to think that this is the worst moment to launch a businesses, but that is hardly the case; history teaches us an important lesson on that regard.
Thomas Edison launched General Electric right as the United States were heading into the Panic of 1893, a period of 16 months where business activity dropped nearly 40% across the nation. Nevertheless, the company persisted and went on to be one of the original 12 companies listed on the Dow Jones Industrial Average in 1896, where it remained for over a century.
Same is true for IBM, launched by Charles Flint June 1911, in the middle of a long two-year panic. While industries everywhere saw double-digit declines in activity, IBM (then named CTR) was able to not only survive but thrive and become the leader in technology that would support the digital revolution, making billions along the way.
Furthermore during the recession of 1937–1938, one of the worst of the 20th Century with GDP decline reaching nearly 19%, that recent Stanford graduates William Hewlett and David Packard decided to formulate a plan for their new electronics company, Hewlett-Packard. Still feeling the sting of the recession, the duo incorporated their business on January 1, 1939, and would go on to build one of the worldwide powerhouses in computers.
Finally remember Microsoft? In 1973, an oil crisis coupled with a stock market crash led to a 16-month recession where the GDP took its worst hit in nearly 20 years. However, this decline did not stop Bill Gates and Paul Allen from developing their new computer software business. Within a decade, the company grew substantially and launched an IPO in 1986 that created 3 billionaires and 12,000 millionaires in the process.
There is constantly something going on, a mix of positive and negative events that are hard to untangle. The perfect moment to launch will never arrive, but now is as good a time as any.
The Glass Is Always Half Full
On the other end of the spectrum, the COVID-19 crisis has propelled our society a decade into the future by effecting a tremendous push towards digital transformation. And I mean this literally: internet companies are seeing five or more years ahead of time adoption and usage figures in their metrics that they were forecasting for the long run.
Why is this important? First of all, this overarching trend is establishing tele-work as the new normal for a wide range of knowledge economy jobs. This is not a temporary fix, it is here to stay: Jack Dorsey, the dual CEO of both Twitter and Square recently announced that employees will have the option to work remotely forever if they choose not to come back to the office. And an increasing number of tech companies such as Shopify, Coinbase, Upwork, Lambda Schools and others are joining in the policy of allowing their people to work from home. Same productivity, less costs, what’s not to love?
This is undoubtedly going to lead to an era of unprecedented experimentation and rapid innovation in new tools, structures and methodologies of remote collaboration. For instance Drew Houston, CEO of Dropbox, one of the world’s leading business collaboration platforms with 2,300 employees and 12 offices, is one of those very vocal about the inefficiency of the modern workplace. He is particularly frustrated about productivity loss caused by “work about work,” the estimated 60% of time that knowledge workers spend on tasks such as finding information, checking email, toggling between apps, and coordinating with people and teams around the world.
About his vision, Houston says: “Every challenge we have as a society depends on being able to harness our brainpower and do knowledge work well. My hope is that in 2030, we’ll look back on now as the beginning of a revolution that freed our minds the way the Industrial Revolution freed our hands”.
At the national level, the countries that understand remote work as a fundamental shift in corporate organization and enact supporting legislation and policies at all required levels, from taxation to labor laws, will be able to attract the lion’s share of both top international talent and capital investments for the next 15 years.
When the talent can work from wherever it wants and assuming that the regulatory framework is in place, the same natural resources that guaranteed a steady flow of revenues via tourism for less technologically advanced countries will be enhanced further. Remote work will be the new force of redistribution, and remote workers the new Hipsters.
South Europe and, in particular, Spain, can greatly benefit from this trend, though most likely we will once again try to stop the tide in order to protect unproductive prerogatives around traditional roles in our highly unionized and inflexible workforce, and thus miss the train.
The Decentralized Society
And since we are into it, let’s broaden our scope into what it would mean to live in a truly decentralized society; that is, an economy in which income opportunities are (at least to a higher extent than today) evenly distributed regardless of your geographic location.
Without the need to commute daily to a “center of production”, we will make smarter use of transportation. Cars will not be so necessary, and less cars on the roads immediately means less accidents and more lives spared. Remember that driving is way more dangerous that flying, impending the arrival of the famous autonomous car (and probably that will not change overnight, because the most dangerous drivers are likely to be the less able to acquire high tech vehicles in the first place). The best alternative to the self-driving car still is… no car at all!
An optimized automotive base also means less consumption of fossil fuels. Besides the extremely relevant geopolitical changes that lesser oil dependency will bring, the mid-term impact we can expect is less pollution and better air quality, particularly in and around the city centers of our suffocating metropolis.
Less time commuting in congested highways will also turn into better control of our schedules, more productivity and more happiness overall. That is, once we manage to redefine our shared spaces with our loved ones in a home that has turned overnight into an office, a gym, a kindergarten and so much more that we are still trying to figure out how to maintain both privacy and intimacy, physical closeness and social distance.
And who knows, that de-localization may even positively affect the housing prices now that proximity to production clusters matters less and “location” can impound a more diverse set of personal preferences. The level of decentralization that blockchain promised (and never truly delivered) will pale in comparison to that of a remote workforce. A distributed society is a better society in many levels.
To be clear, this has been already been possible at least for the last 15 years, and a minority of us (often dubbed as “digital nomads”) have already been living our lives in a very similar fashion. However, the accelerated pace of digital transformation will make this a viable option for an increasingly larger portion of our population.
Else, seeing how as soon as the pandemics eases its grip on us we let loose our fear, anger, resentment and resort to our broken old ways, we may yet again manage to kill the opportunity of a distributed society before it has a chance of growing up. We seem particularly adept at that.
