How a pandemic changed the world
Published on: Sunday, May 15, 2022
By: Assif Shameen
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“During turbulent times, innovation gains traction,” says Catherine Wood, chief investment officer of ARK Invest, a New York-based tech-focused asset management firm.
“Consumers and businesses are willing to think differently and change their behaviour during periods of turbulence and fear.”
As they look for cheaper, more productive or more creative ways to satisfy their needs, disruptive innovation takes root. The current crisis is likely to be no different from the previous ones, which saw rapid behavioural changes, she argues.
The global financial crisis 11 years ago, for example, pushed businesses away from buying software outright to pay-as-you-go software-as-a-service licences and consumers away from brick-and-mortar stores towards online shopping.
The advent of the smartphone at the start of the 2008 crisis laid the groundwork for many a game-changing business, including ride sharing in the aftermath of that crisis. The big winners this time are likely to be the tech giants or the Apples, Microsofts, Googles and Facebooks of the world, which have huge cash piles on their balance sheets.
The crisis will likely make Big Tech stronger than they have ever been. Amazon.com, the logistics and e-commerce behemoth, has emerged as a utility of sorts, delivering essential goods such as toilet paper to American homes as well as groceries, food and even books. Amazon Prime members were able to watch free movies and TV serials or listen to music while confined to their homes.
With same-day delivery already in place, and drone delivery to be rolled out in some areas over the next three years, consumers will purchase goods online more often, perhaps multiple times a day. Most of Amazon’s profits still come from its cloud services arm, Amazon Web Services.
The big losers are likely to be less-agile mid-sized or larger firms with weaker balance sheets. Small companies are often fairly entrepreneurial and nimble, and they easily find ways to navigate a crisis.
Among the sectors that are likely to do well are healthcare, remote working, remote learning as well as e-learning. Schoolchildren in America are already attending classes from home and emailing homework during the lockdown.
Working and studying from home requires software that runs anywhere and enables collaboration. Among the big winners of the work-from-home boom are video conferencing firm Zoom Video Communications and messaging app operator Slack Technologies.
Both Slack and Zoom have an easy-to-access free tier, apart from the corporate version, which allows companies that have not bought the software on subscription to try it out before signing on for it. The average number of messages sent everyday by Slack users is up 20pc over the past two months.
Other beneficiaries include exercise equipment firm Peloton and telemedicine firm Teladoc Health, which helps distribute healthcare away from doctor’s clinics, where they will see only the most serious cases, to patients’ homes. The healthcare industry generates 5pc of the world’s data but is one of its least digitalised industries.
Data-driven technologies such as robotic surgery and artificial intelligence-assisted diagnostic imaging will be part of the next boom.
Another winner is logistics and delivery firms. No one has been making money in the food delivery business because competition is fierce, barriers to entry are too low and revenues are paltry.
Though there is still no visibility on profits, having been in a lockdown, I have a better appreciation for delivery firms. They have been a lifeline, bringing me groceries, food and even medicine from the pharmacy. As e-commerce grows, the total addressable market for delivery will grow and they will get more funding. Eventually, the top players might be able carve a viable route.
The office is dead
The coronavirus crisis has precipitated the largest work-from-home experiment in history. After the first two weeks, US firms are already declaring it a huge success.
When the crisis is over, companies will reassess their real estate needs, have more of their staff work from home and slash their office budget. For most companies, office real estate is a big cost.
Companies will always need offices, but if they can cut 30pc off their real estate budgets, they will have more resources available for marketing, and development of new products and services that will help them grow or differentiate themselves from peers. Clearly, commercial real estate will never be the same again in major global cities — not New York, San Francisco, London or Hong Kong. I would even wager that the same thing will happen to malls in key cities.
If you have been in a lockdown for a few weeks like me, you too would have rediscovered the joys of online shopping. Why would you venture to a mall when the lockdown ends? Shares of the biggest US mall operator Simon Property Group are down 70pc from their February peak.
And housing in downtown metropolitan areas will not be much different. It is expensive to live closer to downtown offices in New York or San Francisco. If more people can work remotely and only need to go into the office two days a week, or only for special meetings, they would rather live in a bigger but far cheaper house an hour or even a 90-minute commute away.
And if you are working from home, you would probably choose to live in a bigger home because you now spend a lot more time there. It would also mean that suburban real estate will be at a premium and the malls that might do relatively better will be suburban malls, not the downtown ones.
The crisis has also provided a new tailwind for digital payments. Cashless payments have been preferred to combat Covid-19 because cash notes have the potential to be “super carriers” of the virus, which lives longer on objects than on human hands because enzymes in our sweat break down the virus more quickly. Plastic credit and debit cards are not a solution because they harbour more germs than a public toilet.
The safest means of payment is using the mobile phone to make contactless payments such as through Apple Pay and digital wallets including Cash App or PayPal’s Venmo at cashiers, or when using public transport. The Covid-19 crisis is tailor-made for boosting digital wallets. India, Australia, the United Arab Emirates and 14 other governments have waived fees for mobile payments and banned cash for public transport since the crisis began.
Tough new world for start-ups
Covid-19 has dramatically transformed the venture capital-backed start-up world. Financing for start-ups has dried up. Indeed, talk in the VC community in Silicon Valley is that valuations are being marked down by 30pc to 40pc.
Once the pandemic fizzles out, it will dawn on founders that in a post-Covid-19 world, many of the start-ups will not be needed.
Others just will not get funded. Some start-ups, which will be left for dead, may have useful technology and indeed might even turn a profit some day.
But it just does not make sense for VCs to keep throwing money after them anymore. In good times, all sorts of ideas, even marginal ones, get funded. But when times are tough, as they are now, even ideas that deserve funding are passed on because there are better returns elsewhere.
Already, more than 30 start-ups in San Francisco have announced layoffs. Company closures and more layoffs across the Valley are next.
What does this mean for start-ups in Asia? Just going by what I have heard from some US-based VCs, more than half, probably up to two-thirds, of the start-ups in Asia will see funding dry up and most of them will fail unless they have a rich uncle willing to fund them for a few years.
Some smart start-ups will sell themselves or pivot to a new niche and still survive, but you will probably count their numbers on your fingertips.
Clearly, the shake-up in Asia will be brutal. Sure, there are regional VC firms with plenty of dry powder and there are start-ups that have the potential to be the next Amazon, Google or Microsoft, but the overriding concern of the VCs, private equity firms and angel investors over the next two years will be to conserve their cash rather than just hand it over to the next start-up that shows up on their doorstep asking for money.
Surveillance compromise
Another key change in the aftermath of Covid-19 will be how much the US and Europe will resemble China as they embrace surveillance.
Facebook, Google and Amazon collect more data than their Chinese counterparts but, for now, most of that data is used to sell ads or goods and services.
Western democracies have traditionally valued individual civil liberties more than concerns about larger threats such as national security and pandemics. In the US, a lot of that changed in the aftermath of the 9/11 terrorist attacks.
Americans agreed to sacrifice some of those freedoms and collectively backed the Patriot Act, which armed law enforcement agencies with new tools to detect and prevent terrorism.
It was a new social contract between Americans and their government: You keep America safe and we will close an eye to some of the things security agencies need to do to achieve that.
Covid-19 is likely to do something similar with surveillance. The lesson the US has learnt from this crisis is that China minimised the pandemic with its ability to take all the data being collected by e-commerce giant Alibaba Group Holding, mobile gaming behemoth Tencent Holdings, TikTok and Toutiao owner ByteDance, and search engine Baidu, alongside Chinese cellphone operators, and use it to trace how just about every citizen moved and whom they came into contact with.
The longer Americans are in quarantine, or lockdown mode, the more likely they are to agree to compromises on issues such as civil liberties, which will allow the government to tap the data that Facebook, Google, Amazon, Apple and their cellular service providers constantly gather to keep track of them.
Long after Covid-19 is over, you and I will be worried — when we go to the office, a sports stadium, restaurant or social gathering — about whether we are in proximity to someone carrying a contagious disease.
The bet that policymakers are making is that increasingly more people will be willing to be tracked and tested for their temperature almost everywhere to protect themselves. As the world came out of the 2009 financial crisis, it was not clear just how radically technology would change our lives.
We are likely to see even more dramatic changes to lifestyles and business practices, as well as healthcare and digital technologies, in the aftermath of this coronavirus pandemic.
- Assif Shameen is a technology writer based in North America. This appeared in the Edge. Assif previously reported on Sabah issues for the now defunct Asiaweek in the 1980s.
- The views expressed here are the views of the writer Assif Shameen and do not necessarily reflect those of the Daily Express.
- If you have something to share, write to us at: [email protected]
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