An Agent of Change

A look into the Covid-19 pandemic's influence on how we think, spend, and manage our businesses.

By Mike Loukides and Q McCallum
August 25, 2020
MAX System Change Ahead. MAX System Change Ahead. (source: Jason McHuff on Flickr)

The Covid-19 pandemic has changed how people and businesses spend and operate.  Over the coming pages we’ll explore ways in which our current world is already very different from the one we knew just a few months ago, as well as predictions of our “new normal” once the proverbial boat stops rocking.  Specifically, we’ll see this through the lens of decision-making: how has Covid-19 changed the way we think? And what does this mean for our purchase patterns and business models?

Welcome to Uncertainty

You’re used to a certain level of uncertainty in your life, sure.  But the pandemic has quickly turned up the uncertainty on even basic planning.

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Your dishwasher, piano, or clothes dryer is making an odd sound. Do you proactively call a repair service to check it out?  Your ounce of prevention will also cost you two weeks’ wondering whether the repair technician was an asymptomatic carrier.  If you hold off, you’re placing a bet that the appliance lasts long enough for treatment to become widely available, because you certainly don’t want it to break down just as infection rates spike.

Stresses on a system reveal that some of our constants were really variables in disguise.  “I can always leave my house.”  “I can get to the gym on Friday.”  “If I don’t go grocery shopping tonight, I can always do it tomorrow.  It’s not like they’ll run out of food.”  These weren’t exactly bold statements in January.   But by March, many cities’ shelter-in-place orders had turned those periods into question marks. Even as cities are starting to relax those restrictions, there’s the worry that they may suddenly return as the virus continues to spread.

As this reality sets in, some of us are even weighing what we call “acceptance purchases”: items which show that we’re in this for the long haul.  Your gym isn’t closed, but it’s as good as closed since the city can quickly order it to shut down if local case counts climb again.  So maybe it’s time to buy that fancy exercise bike.  And ride-hailing services were appealing until using them increased your exposure to the virus.  Maybe now you’ll buy that car you sometimes think about?  You had considered downsizing your home, but you’ll appreciate the extra space if you’re spending more time indoors.

Those sorts of purchases are meant to last you for years, though, which means they’re only wise investments if the pandemic (and its impact on the local economy) continues for a long time.  What if we see improved prevention or widespread treatment within a few months?  Do we want to try to offload an exercise bike or a car that we no longer need? The longer you hold off on making those decisions, the greater the chances that you’ll make those purchases too late.

It’s tough to make a decision when you can’t rely on your near-term world falling within some certain, predictable scope.  You try to keep all of your options open at all times so that you can be ready for any possibility.  But that’s a lot of extra strain on your brain.  And it’s tiring.

Your house just got smaller

The pandemic has made a number of businesses less desirable or outright inaccessible.  Doing that work yourself reduces the impact around the uncertainty of when they’ll return.  It’s also a lot more responsibility for you.

Congratulations on running a restaurant, cafe, bar, cinema, gym, school, daycare, office, and storage facility.  You get to buy workout equipment, cooking gear, hair care tools, teaching supplies, and anything else needed to backfill services to which you used to outsource. You’re responsible for the decisions on which models of equipment to buy, as well as the upkeep thereof. You suddenly need to know a lot of things about a lot of things, but you don’t have the time to become an expert in any one of them.

Welcome to the diseconomies of non-scale: being small and self-sufficient is expensive.

Like a factory, hotel event space, or a fast-food kitchen, you find yourself constantly partitioning or re-tooling rooms to compensate for your limited space.  The gym becomes the reading room becomes the video meeting space becomes the work area.  (You and your spouse flip a coin to see who gets the real office and who gets that basement corner.  Hint: if you want the nicer space, make sure you’re on more video calls. And pretend that you can’t get Zoom backgrounds to work.) The kitchen table flips between a dining area and a school, three times a day.  The bathroom becomes the hair salon every week and quickly switches back again.  All of these swaps take time, effort, and mental energy, what economists collectively refer to as switching costs.  They add up. Quickly.

Nor is this just about the size of the home.  It’s a matter of how much you were using it before the pandemic started, the number of spaces present, and the ratio of people to square feet.  If you live in a sprawling, suburban house, but every room was already dedicated to some function or someone’s personal space, then you’re just marginally better off than the person occupying a small, urban apartment.

This isn’t just about “working from home,” either.  That usually means that you have a space set aside in your house to work and to take calls, and you have the house to yourself during working hours. Experienced remote-work professionals will tell you that we’re living a very different scenario.  This increasing need to run a standalone, be-everything home means that we are suffering from the curse of generalism: we’re our children’s teachers, our cooks, our housekeepers, our barbers, our IT department, and our fix-it crew.  We’re becoming more self-sufficient, but at the expense of having less time to specialize in our main jobs. All of this means that we’re spending a lot of time just getting by, and not much time advancing.

Connections as Currency: Getting By and Getting Supplies

In most places, you don’t need to be “connected” to get by day-to-day.  Whom you know is less important because, with even a modest income, you can get most of what you need.  You mostly care about diversifying your professional network, because that helps you to find a new job, which is what provides you the money that allows you to compensate for not knowing anyone else.

When a pandemic triggers stresses in our supply chains, that idea breaks down.  Whom you  know in your personal sphere suddenly counts a lot more.  Instead of money, it’s your social network that gets you through the day.

Do you know someone whose job gives them leading indicators on the spread of the virus?  Early in the pandemic, friends of medical professionals got some advance warning of what was to come.  They could gather information from their professional spheres to let their personal networks know that something nasty was brewing.  The same holds for anyone whose business sells protective gear or cleaning supplies.  Over casual drinks, they might mention: “It’s weird … we’re getting a lot of new orders, and not from our usual customers.  Something’s up.  You may want to buy some extras, just in case.”  (This, by the by, shows the value of keeping an eye on your company’s data.  If you don’t have systems to tell you when your sales numbers are abnormal, you may miss information that you already had in-hand.  And in this case, it would have been time-sensitive info.)

Communities of shared experience are home to these socially-strong yet professionally-diverse networks.  Family and close friendships top the list, with religious and ethnic ties running a close second.  (People who were part of the same wave of immigration from the same country often forge ties that are as strong as family.)  Neighbors and people who share a hobby are also in there, though to a lesser degree. Within these groups there’s always somebody who has a quick tip, someone who “knows a guy,” someone you can pull aside for a quick “Hey can I ask you about …”  Maybe your niece works at a big grocery chain, and she can tell you when the shipments of hand sanitizer arrive.  In December, this would have been a trivial mention.  Today, when goods are scarce, this is timely information and it can make a difference.

Personal networks often have the benefit of being geographically dispersed. Your best friend can ship you cleaning supplies, since they are plentiful in his part of the country.  Your extended family, which stretches from Paris to Singapore, can tell you how their cities are handling shelter-in-place rules.  Chatting with those far-flung aunts and uncles gives you several weeks’ advance notice on how your city’s rules may turn out.  That reduces your uncertainty, which makes it easier for you to prepare, which reduces your stress and decision fatigue.

Your ability to forge new relationships can compensate for a smaller social network.  If you don’t have a relative who works at Target, you can ask someone who works there, so long as you have the skill to spot whom to ask.  You have to be able to read people, to see who would be receptive to that question. And you also need to tell whether this would be a simple favor, or something that merits monetary compensation.  The value on that information just increased by a wide margin; shouldn’t the price follow?

Relationship-building also counts in the B2B setting.  Such was the case with grocery chain Trader Joe’s.  They’ve managed to avoid shortages during this pandemic, most notably in toilet paper.  When other stores seemed to run out, Trader Joe’s always magically had some in stock.  That’s because they were able to strike a deal with an unnamed hotel chain to buy supplies that were going unused due to dramatic cuts in travel. Granted, Trader Joe’s very business model—white-labeling manufacturers’ goods—smoothed this road.  But their ability to forge that relationship counted just as much as their ability to execute on selling the goods.

The Challenges to Come: Tracing the Chains

We can reduce our pandemic-driven stresses by reducing the uncertainty.  To do that, we can trace chains of knock-on effects to determine what changes are coming, and plan accordingly.   For example:  “many restaurants have closed up,” therefore, “there’s less waste from restaurants,” therefore, “there’s less food for rats,” therefore, “expect rats to get more bold.”  So be careful when taking out your trash.  “The pandemic has drastically cut air travel,” therefore “airlines will have less revenue,” therefore “airlines will furlough employees,” therefore “businesses those employees patronized—from in-airport restaurants to hotel shuttle services to their at-home economies—will suffer.”

Though we can trace just one chain of effects at a time, multiple paths spin out of every “what next?” and spread out like a spider-crack in a window.  They connect down the line to weave a fabric of impacts. Case in point: WSJ’s Scott McCartney points out that the sudden drop in air travel has upset airlines’ ability to set prices, since they take such a data-driven approach. People who work in the ML/AI field will tell you that this is not just an airline problem: a sudden shift will upend any predictive models built on past behaviors, regardless of industry.  That will affect other fields’ dynamic pricing, yes, but also fraud detection (your credit card reflects a lot of outlier purchases, times, and locations since February) and demand forecasts (a knock-on effect of our collective outlier purchases).  That, in turn, ties to inventory management, which is tied to supply chains, which involve all of the players in the shipping industry, which is tied to fuel consumption and vehicle maintenance…

As with any tightly-coupled, complex system, all of these connections work in our favor until they suddenly don’t.  Expect pandemic-related changes to cascade, revealing both endogenous and systemic problems that are related in unexpected ways.

One problem with tight coupling, Charles Perrow notes in Normal Accidents, is that materials only have one path to take through the system.  If a component in the middle breaks, everything backs up so the entire system is as good as broken.  You can repair or re-create the old paths (when possible) or create new connections between components.  In Covid-speak, that means our long-term solutions fall into “partially restoring and re-thinking the pre-pandemic life” and “creating new ways to handle the day-to-day when there’s a highly infectious disease running around.”  There are business opportunities in both camps.

Covid as a Forcing Function: New Opportunities To Handle Pandemic Life™

We mostly assume the phrases “contactless” and “touch-free” refer to electronic payments.  Those are very much in demand right now, but the touch-free space now extends to the wider notion of strangers not interacting in-person, and not handling the same objects at the same time.  That opens the door to online learning, telemedicine, tele-anything.  If you can provide your service at a distance, you have a lot of new prospects.

Entertainment already had a firm footing in the online world thanks to video streaming services. The pandemic, and its dramatically reduced cinema attendance, has provided them even more leverage as some movies will have a shorter time on the big screen before they shift to online video.  (As a side note, there’s another chain of knock-on effects to explore: since studios have been known to time releases to coincide with certain seasons and to have a better shot at industry awards, how will that change when films head into living rooms that much sooner?)  Other groups, like Chicago’s Lyric Opera and New York’s Met Opera, are hosting performances online as their subscribers can no longer attend in-person.

Still, it’s become more difficult for performances that rely on people being in the same space. Stand-up comedians from Nimesh Patel to Dave Chappelle have recently been able to pull off outdoor gigs with live-but-socially-distanced audiences. Fire-spinning and belly-dance performer Dawn Xiana Moon, of Raks Inferno and Raks Geek, combined multiple streaming services to simulate all of her performers being “on-stage” at the same time. This required her to leverage her technology background, a skill set that is admittedly rare in the live-act world, and she’d still prefer a single platform that just works. By comparison, TV and movie studios have yet to explain how they will manage to film while keeping cast and crew socially distant. The bottom line is that companies that create tools to improve filming multiple, simultaneous, geographically-dispersed teams will have a lot of customers.  (And for movies, will we see an increase in animation to fill the gap?)

People are also demanding more of their home internet infrastructure to support increased school- and work-related loads.  (The authors know several people who have shelled out to their ISPs for greater bandwidth.)  That also means a greater load on mid-tier services like social media sites, videoconference services, and the aforementioned streaming video platforms.  If you sell networking hardware or provide network operations services to those companies, you will have no shortage of work.

If the pandemic continues long enough, we expect to see a deeper penetration of home broadband service, especially wireless broadband.  This is another touch-free offering, as it permits your provider to establish and troubleshoot internet connectivity issues without sending a technician into your home.  (As another knock-on effect, this means providers will be able to limit field technicians’ service radius to their towers and datacenters, which should let them cover more territory on the same number of staff.)

Traditional, multi-year lease commercial real estate was already experiencing disruption due to coworking spaces.  They’ll now both suffer as companies rethink their post-pandemic office needs.  Doubly so since some newly-remote workers are taking the opportunity to move out of state. (Yet another knock-on effect: without office workers, what will happen to the lunch spots and bars that lined the dense urban-business landscape?)  You also have retailers abandoning spaces since there are far too few customers to browse stores. Two types of consumers may pick up that inventory, though.  The first, in the short term, Amazon may convert some old mall spaces into distribution centers. Other businesses will undoubtedly find ways to repurpose empty urban office spaces at deep-discount prices.

Second, and in the longer term, we’ll accept that our homes are simply not large enough to be our Everything Place.  People who choose to remain in dense urban environments will want their apartments to be more like standalone houses, which means having space for in-unit washer/dryer, multiple bathrooms, and multiple rooms to serve as offices. Perhaps cities will divvy up old office buildings into large apartments to meet that need.  That’s admittedly more of a stretch, if for no other reason than the time scale involved for the construction effort and the zoning law changes.  For now, some percentage of urban residents will simply pack up for the suburbs, or even more rural areas out of state. Let’s face it: if the restaurant scene has dwindled and public transit feels like too much of a coronavirus risk, then urban living has lost a lot of its luster.

Wherever we choose to live, we’ll need more support for running our homes.  This will include ways to make the most of our limited space, such as smaller-scale workout equipment and compact storage, and increased support for DIY repairs, like video tutorials from manufacturers on how to service their products.  This is another stretch, but if the pandemic lasts long enough, manufacturers will modify their products to make them easier to service.  That, or cheaper to just throw away and replace when they encounter a problem.

The difficulties of schooling don’t end with table space and bandwidth needs.  There are also the socioemotional concerns such as college students learning how to live away from home, and how the K-12 set learns to socialize when they don’t interact in person.  Not to mention, who will do the teaching?  In March, when stay-at-home orders started to hit US cities, many parents suddenly had to balance their full-time jobs with being full-time teachers.  (Technology consultants Sarah Aslanifar and Bobby Norton jokingly refer to their new roles as, “working from home-school.”)  Businesses took a double hit as they had to scramble to find a way for people to work from home, and then those same people spent the next several weeks distracted during the workday.

Some parents have since formed social “pods” with neighbors whom they trust to perform compatible pandemic hygiene.  Some of those have evolved into educational pods, wherein parents spring for someone to teach their group of kids.  An article in MIT Tech Review mentions a price tag of $10,000 per student, per semester.  This isn’t accessible to everyone; but for high-earning parents, it’s a simple economic decision: the cost to outsource schooling is smaller than the amount of money they’ll earn when they can perform their day jobs at full capacity.

Higher education was already experiencing some disruption—boot camps and certificate programs on one end, and students questioning their post-college job prospects on the other—and the onset of the pandemic has increased the pressure.  This goes beyond the last few months of sorting out whether and how to open campuses for autumn 2020.  Parents and students alike also question the price tag of a fancy four-year college when students will be attending classes from their kitchen table.  (One SNL sketch framed the experience as “University of Phoenix Online, with worse tech support.”)  For the time being, colleges can busy themselves by shoring up courseware and videoconferencing platforms in order to set autumn 2020 classes in motion.  They’ll quickly need to sort out other near-term concerns (shoring up lost profits from empty student housing) as well as their future prospects (demonstrating their value compared to vocational programs, especially if the job market suffers over the long term).   If schools can’t sort this out on their own, they’ll likely pay someone to sort it out for them.  There’s also a business opportunity in providing a centralized, one-stop SaaS platform such that colleges won’t have to cobble together their own with a mix of one-off tools.

One silver lining of working from home is that your job prospects just opened up.  Covid-19 has forced a lot of companies to admit that the old “this work can’t be done from home” excuse doesn’t hold up.  Some of them are even starting to like it: they see how much money they were burning on an office for people who already knew they’d be more effective working from home.  Many of them will scratch that line item from next year’s budget.

This means we’ll see more remote hiring in the sectors that can support it.  That will establish a clear boundary between the companies that see the benefits (“we’re now able to hire across the country for these hard-to-fill roles”) and those that do not (“we’re only hiring people who live in this city, for when we go back to the office”).  Big tech-sector names like Google and Facebook have already announced plans to extend work-from-home support, while Twitter and Atlassian have flat-out said that their crews can work from home indefinitely.  In some fields, failing to provide a remote-work option may limit your talent pool.  It will be the equivalent of running an office space in the suburbs when most companies, and their prospective employees, exist in the dense urban center and have no desire to commute.

Bringing Back (Pieces of) “The Old Normal”

Just as we’ll pay for help adapting to the current state of things, we’ll also pay for some semblance of “the old normal.”

People generally like meeting up, whether one-on-one for a tea or in larger groups for a party.  We’re already using videoconferencing tools to hang out with friends and family, and to attend events.  But we’re adapting to the tools more than the other way around.  Right now services like Hangouts, Meet, and  Zoom are still very much designed for, well, video versions of office conference calls: one person speaks at a time, and you get a “Brady Bunch” grid view of attendees.  Expect the incumbent vendors as well as new upstarts to create tools that are better suited for [specific interaction]-over-video, like conferences, classroom teaching, or music lessons.

We’re really feeling this in online conferences.  While webinar tools fulfill the mission of letting a person deliver a talk to a large number of attendees, they don’t support other aspects of an in-person event.  Randomly bumping into people and “hallway track” sessions have forged long-term bonds between conference attendees, far more than the talks themselves.  This could serve as a driver for VR, as that will take us away from “attending events from our living room” to “being in our living room, but actually attending events in a dedicated space.”  There is a big difference.

Another reason people meet up is to play games.  Online games are nothing new, and they’ve even gained some mainstream street cred thanks to casual gaming.  Expect to see improved coordination, such that you can play with people of your choosing (a feature lacking in a number of iOS Game Center offerings).  People playing more video games may also lead to greater participation in esports leagues, and even taking business meetings over a gaming session.

In-person interaction is our most risky form of socializing at the moment, but it’s also the one people want the most. Goods and services that help us to (safely) meet face-to-face will not just help us on an emotional level, but they could play a key role in helping the economy get back on its feet.

We have masks and face shields, which are good for being in public.  What about protective overgarments, reminiscent of 1950s interpretations of outer-space wear?  We could wear them to protect our entire body in public transit or airplanes, and then shed them before entering a friend’s home.  There’s also the down-to-earth business of designing and installing plastic shields between restaurant tables.  Maybe someone will create transparent, oversized cabins that allow you and a few trusted friends to be “on the beach” but still be indoors and away from others.

Meeting in person also counts for office space.  In a work-from-home world, some teams still prefer the in-person experience.  What can we do to make it safer to be in the office, beyond standing several feet apart at all times?  An effective but low-tech offering could involve installing protective shields around conference tables (not unlike what we see in some restaurants) or modifying office layouts to discourage crowding.  The next step up would increase touch-free actions, such as choosing your elevator floor through a smartphone app.  Larger and higher-tech offerings would go deep into the guts of the building to install virus purifiers in building HVAC systems and the accompanying ductwork.

What Next?

Where do we go from here?  That depends how long we go without treatment or improved preventative measures.  One thing’s for sure: Covid-19 is a driver of change.  There is no more “normal” in terms of how we shop for groceries, attend events, or even lay out our homes.  It’s up to us to adapt to our present, even as that present continues to change, and that will influence how we decide what to buy and sell.

How much we change, as people, depends on how long the pandemic lasts.  It’s possible that it will carve deep grooves in our collective social memory, similar to the Great Depression, and its impact will influence how people behave long after the disease is a threat.

It also depends on how much we are willing to adapt.  That is a function of how soon we’re willing to let go of “normal,” which is really a euphemism for “the past.”  Especially since the past is heavily mythologized.

Post topics: Business
Post tags: Commentary
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