The Big Acceleration
Amid the uncertainty around COVID-19, one thing has become increasingly clear, several trends from the last decade are accelerating. We’re seeing the rapid adoption of technologies in sectors of the economy that have been slow to change. Though businesses of all sizes have taken a hit, it’s the smallest ones that are struggling the most, while some of the biggest ones continue to thrive. And with all this, inequality continues to rise as millions of Americans lose their already low paying jobs.
The societal shifts behind these trends are growing stronger as we deal with the immediate impact and then fallout of COVID-19. If left unchecked, the pace of change will only intensify with disastrous consequences. Instead of allowing these trends to continue, we need to reimagine how to structure our society. To me, it means rallying around Marc Andreessen’s call to reboot the American Dream by building the next generation of solutions and following Andrew Yang’s evidence-based approach to revitalize our government. No matter which path we ultimately take, I hope this crisis becomes a catalyst to reshape our society for the better.
Digital and Robotic Transformation
As a venture capitalist working with startups, I’ve seen how remote and flexible work is ingrained into the collective consciousness of the startup ecosystem. Now, COVID-19 is accelerating the digital transformation of corporate America, Main Street, and nearly every other aspect of life.
The digital transformation of remote work, learning, medicine, etc. is happening at breakneck speed. Companies that didn’t embrace technology before COVID-19 are scrambling to navigate the new work-from-home norm. Schools and universities are teaching students remotely. To keep people away from hospitals, doctors are providing the first line of care via telemedicine. Restaurants now live or die by delivery platforms.
Businesses that facilitate these changes are thriving. Cloud service providers like Microsoft and Cloudflare have seen large upticks in demand. Zoom’s users jumped from 10 million to over 200 million as business, educational, and personal use explode. Though elevated usage numbers will not stay, this pandemic has forced many people to use new technologies for the first time. A large number of them will continue to do so after this pandemic is over.
This pandemic has also exacerbated the need for technology to replace and augment humans in physical production. China, for example, has ramped up its use of robotics and automation as factories struggle to bring production lines back online. Here at home, there are increasing concerns over the food supply chain. As workers get sick, we grapple with questions about the vulnerability of our most critical supply chains and infrastructure, creating new incentives to keep humans out of the production loop entirely.
More Market Concentration
The U.S. has seen a decade-plus increase in the concentration of economic activity into fewer and fewer companies. As a percentage of GDP, the S&P 500 has nearly doubled in size compared to a decade ago. Businesses are more than ever divided into those that are “too big to fail” and those that are “too small to matter”.
This pandemic has supercharged the winner take all economy. Take Amazon for example. The trillion-dollar company’s share price reached all-time highs last week as coronavirus cases peaked in the U.S. Its core business lines are all benefiting from the pandemic. Demand for groceries, daily essentials, and cloud services has boosted its Whole Foods, e-commerce, and cloud computing businesses.
Even the large companies that are directly and negatively impacted are getting more direct access to relief compared to SMBs. The 10 largest U.S. airlines were able to negotiate a $25 billion rescue package directly with the Treasury. Compare this to the struggles of small businesses that are locked out of SBA loans and the depleted Paycheck Protection Program.
Crushing Inequality
Inequality in the U.S. has been rising since the 1980s with little pause. This pandemic has just made it worse.
Those well off have largely been insulated from the worst of the economic fallouts of COVID-19. Many well-paid white-collar professionals can work from home, and their services are still in demand (though recent layoffs have been alarming). While their 401ks may have taken a short term hit, surprisingly, stock prices today are roughly where they were a year ago.
In contrast, the economically vulnerable have been hurt the most. COVID-19 has decimated large swathes of the service sector including many of those living paycheck-to-paycheck and those without health insurance. The protests to reopen the economy are a symptom of these economic frustrations. For the “lucky” ones that are deemed essential workers, many are working in hazardous circumstances with limited protections.
Never Waste a Good Crisis
In some ways, the world feels like it has stopped in place for the past month. People can’t move, graduations are canceled, and big life decisions have been postponed. Yet, when I look at the broader shape and direction of society as a whole, the trends of technology, market concentration, and inequality have not relented and only accelerated.
I originally wanted to write about some of the challenges and opportunities that will come out of this crisis. As I delved deeper into what COVID-19 meant for people and markets, I realized that a post-pandemic normal is just an acceleration of the path that’s been set in motion decades earlier. What this pandemic has done is bring the future that we’ve been racing towards closer to the present.
Because the challenges that we face today aren’t new, neither are the solutions. In 2015, Bill Gates warned that we weren’t prepared for a pandemic and shared his plan on what to do. Yet, governments failed to take him up on it. We shouldn’t make the same mistake coming out of this crisis. We already have great thinkers championing ideas worth experimenting with, so let’s do it! For society at large, the question is whether we reach escape velocity by leveraging this crisis as a catalyst for change or whether we run into a brick wall by continuing business as usual.
