“People who are no longer contributing to society should be lined up against a wall and shot.”
The economic rationalist in the classroom paused for effect.
“Their family should be billed for the cost of the bullet.”
There was a moment of stunned silence. Then his classmates all piled on to decry the cold hard logic he had applied to reach his conclusion.
It would be inhumane. Cruel. State-sanctioned murder.
He shrugged, unimpressed.
None of the objections had in any way addressed the economic merits of his conclusion.
Morally it may be dubious.
Rationalising away the ethical concerns may cause a few sleepless nights, but could be done.
As the initial outrage dissipated, he uncrossed his arms and started ticking off points on his fingers.
“One. It would be good for the environment. Dead people no longer consume or create waste.”
“Two. Reduced demand for scarce resources. We each get a larger slice of the pie, as it is shared amongst fewer people.”
“Three. It solves the housing “crisis”. Housing stock would turn over more often. Lowering prices and easing urban sprawl.”
“Four. Pensions would no longer be underfunded. They wouldn’t be required at all.”
“Five. It defuses the demographic time bomb that will collapse the social security safety net under its own weight.”
“Six. Taxes would be much lower. Governments would no longer need to fund prisons and rehabilitation programmes. Long term unemployment benefits. Hospital facilities for chronic maladies. Aged care homes.”
“Seven. People would inherit at an earlier time in their lives when it could actually do them some good by helping pay off the mortgage or finance tuition fees for their own children.”
“Eight. Education and preventative health care would be treated for what it really is: an investment in the future.”
“Nine. Society would become safer. The reward for breaking the law would rarely justify the huge downside risk.”
“Ten. It thins out the shallow end of the gene pool. Restores the natural order. Survival of the fittest. Only the smart and the strong survive.”
He paused again. Running out of fingers before he had run out of arguments.
A flame-haired girl with a sensitive soul leapt to her feet and called him a heartless bastard. She stormed out of the classroom with tears in her eyes, slamming the door so hard the windows shook.
The economics teacher glanced up from his newspaper, peered at the clock, and declared the lesson over.
What happens next?
I was reminded of that classroom debate by some of the Coronavirus economic commentaries I have read this week. There were a lot of words, but little substance.
Nobody knows how things will play out. The smarter folks are, the less inclined they should be to offer an ill-informed opinion.
Beneath all the noise and media-fuelled hysteria, there are starting to be some interesting discussions about what happens next. Not with the disease itself, that is the domain of scientists and doctors. I’m referring to what happens next with business, economics, and society in general.
Where have the weaknesses in the system been exposed?
What have we learned from the experience of quarantines and lockdowns?
How do things change if the age skewed mortality rates play out on a global scale?
3 in 1000 people don’t survive in the under 50 age cohort. There is bad news for 1 in 12 septuagenarians. Those odds halve to 1 in 6 for octagenarians. Not quite a Thanos moment, but it will certainly create some vacancies at the local aged care home.
Remote working by default
In China, South Korea, and Italy whole suburbs, towns, and even cities have been quarantined.
An increasing number of firms have banned international business travel. Many of those who haven’t have mandated a fortnight of self-quarantine upon the employee’s return. Schools are randomly being closed. Public events cancelled.
Workers are increasingly being required to work remotely.
The obvious short term play here was to rush out and buy shares in video conferencing providers like Zoom.
Now think about what the longer term plays might be. What happens next?
Martin Fowler recently wrote an interesting piece about some of the challenges his firm’s staff and clients faced with the sudden enforced mass adoption of remote working. It was an adjustment, not always smooth sailing, but it worked.
Remote working has been a viable option for a long time.
Two decades ago, I spent a couple of years tethered to the end of a dial-up modem line, working from home when I wasn’t on the road touring around client’s offices in Scandinavia.
Over time technology and bandwidth have improved, but the core experience is largely unchanged.
One interesting side effect of the quarantine experience is that whether they realise it or not, firms the world over are conducting A/B testing on the viability of remote working for their workforce.
Can the quarantined workers get their jobs done?
Is their productivity acceptable? Does it improve away from the distractions of the office?
Are video conferences and VOIP calls viable alternatives to in-person meetings and workshops?
Can virtual classrooms or YouTube presentations substitute for convention keynote addresses and lectures?
The technology aspect of this experiment is interesting, yet irrelevant. We already know the technology is “good enough”. The problem has long been the insecure bosses who either don’t trust their staff to work unsupervised or are poor managers who cannot get the job done without micromanaging.
Take a moment to think through the ripple effects once employers realise that their businesses continue to function when most people work remotely.
At that point commercial real estate in the City starts to look hugely expensive.
So too do all those satellite offices in undesirable locations scattered around the fringes of big cities.
A confluence of trends has been gathering steam for a long time. Bring-Your-Own-Device. Hot desking. Offshoring. Open-plan floor plans. Outsourcing. Remote working by exception.
When combined, these show a clear long term direction of travel. Office workers becoming ever more transient. When the main tool of your trade is your brain, you can work from anywhere.
One possible outcome of the widespread cancellations and quarantines is that this trend gains momentum.
Remote working flips from being the exception to becoming the default.
What happens then? How might things change?
Commercial property rents fall. Office space owners struggle to find long term tenants to occupy surplus capacity. Corporates will likely maintain a vanity address, but this will be used for meeting external clients and corporate hospitality. A floor or less, no longer the whole building.
The market price of REITs fall as a result.
Reduced demand means construction firms will have fewer new buildings to erect. Combine this with the environmental impact of all that concrete, and we start to witness a structural change, not just an iteration of the building cycle.
The share prices of commercial construction firms and their suppliers fall.
Traffic congestion eases as workers no longer all try and commute at the same time during rush hour. Demand for vehicles falls, adversely impacting the share prices of automotive manufacturers and their supporting industries.
Remote workers realise that they can live anywhere that there is a reliable internet connection. Demand for property within easy commuting distance of large cities reduces.
As the ranks of the city-based office dwellers thin out, property prices in metropolitan areas stagnate. Possibly even fall. Suburban entertainment, hospitality, and retail establishments encounter tough times due to a lower concentration of local customers.
Meanwhile, regional property prices may rise, as the city worker exodus heads towards the nicer parts of the country. Given the option, where would you prefer to live? Lewisham or the Lakes District? Clapham or the Cornish coast?
Co-working spaces will experience a boom as Bring-Your-Own-Device evolves into Bring-Your-Own-Office. Many homes are not well suited for remote working. Too small. Too many distractions.
The beauty of remote working is that it empowers workers to have greater control over how and when they work. If they want to go for a mid-morning jog or make themselves something healthy for lunch they certainly can. But most won’t.
Mental health services will experience increased demand over the medium term. When home and workplace seamlessly blend together, many will struggle to find a comfortable balance or the self-discipline to maintain limits on their working hours.
There would also be an increase in healthcare concerns resulting from a sedentary lifestyle. Removing the daily commute and the need to go outside to grab a sandwich at lunchtime means the longest daily walk many will take is from their bed to their lounge, via their kitchen for some snacks. Amazon, home delivered groceries, and takeaway meals remove the need to venture outside.
Before we slip into a Brexiteer pipe dream of restoring the regional areas of Britain, we should remember that those bonus chasing bosses will quickly realise that if a job can be performed remotely from Marlow or Middlesborough, it can just as effectively be performed from Mauritius or Mumbai at a fraction of the cost.
The city worker exodus would likely occur regardless, migrating from high cost of living areas to locations where money can be stretched a bit further. If you’re going to be unemployed, or underemployed on far less money than you once made, then your belt will need tightening!
Knowledge workers in many niches already find themselves competing in a global race to the bottom. The Fiverr experience at scale. All you need is broadband, a basic grasp of business English, and enough domain expertise to make you an attractive hire.
Fantastic for those living in a low cost of living locale with few local opportunities. Financially perilous for those attempting to service a mortgage in a once great city with an eye-wateringly high cost of living.
The globalisation of the live streaming sex trade makes for an informative case study here.
A commodity skillset.
A global marketplace.
Limited barriers to entry.
Workers providing their own equipment and setting their own hours.
Accounting, legal expertise, and underwriting all have a higher barrier to entry, protected by anti-competitive guilds who regulate their numbers and (in theory) their behaviours.
That said, the market dynamics will play out much the same, just drawn from a smaller talent pool.
Wages won’t dramatically plummet like a headline grabbing stock market downturn. Instead, they will stagnate. Perform the dead cat bounce. Be left behind, as wages in other sectors and other locations do grow.
None of this is revolutionary thinking.
The thing that will have changed as a result of the pandemic is that many employers will have personally experienced widespread remote working in action.
Overcome their fear of the unknown.
Come to recognise it as a viable way forward.
That is a genie that can’t be put back in the bottle.
Concentration of risk
My former classmate’s unpopular argument was certainly distasteful. However, his analysis demonstrated that there can be a multitude of outcomes triggered by a single event.
His ability to see past the immediate noise and completely ignore the moral aspects of his actions proved to be a very successful combination, subsequently earning him a regular place on the Young Rich List.
One thing we can learn from his approach is to step back and do the thinking on a particular issue. Looking beyond the immediate knee-jerk reactions, the fashion, and the hype.
Populist politicians will likely use the Coronavirus to raise the drawbridge and fan the fear of the “other”.
Rent-seeking lobbyists will push for tax cuts and reductions in official interest rates, asking taxpayers to act as a shock absorber once again.
Many will realise the “single point of failure” risk associated with concentrating supply chains and logistics.
For a time.
Until short term incentives to boost the bottom line induce a form of collective amnesia, in much the same way that many of the financial controls and protections that were implemented following the financial crisis have subsequently been watered down or dismantled.
What happens next? Life will go on, much the same as it always has.
There may be a few lasting changes.
Obvious in hindsight.
Difficult to detect with any certainty as they unfold.
One of them will be the hastening of day that we work remotely by default.
- Chamary, J.V. (2019), ‘The Science Of ‘Avengers: Endgame’ Proves Thanos Did Nothing Wrong’, Forbes
- Fowler, M. (2020), ‘Coping with Covid-19‘
- Janda, M. (2020), ‘RBA slashes interest rates to new low of 0.5pc to counter coronavirus hit’, ABC News
- Worldometer (2020), ‘Age, Sex, Existing Conditions of COVID-19 Cases and Deaths‘