The World After the Coronavirus
This week brought to mind a quote from Lenin.
“There are decades where nothing happens; and there are weeks where decades happen.”
Empty streets, full hospitals, shuttered sports leagues, tumbling markets, and grim dispatches from the front lines. This was the week that America woke up to the reality of COVID-19 and began to fear in earnest. In all likelihood, you have received texts from friends with photos of ravaged grocery shelves, and you have spoken to your family and friends about contingency plans. The sheer volume of news and the speed of advancement has defied logic; an elephant has, somehow, been stuffed through a letter box.
The effect is that we are living in a different world than we were seven days ago. It will be increasingly remade over the next 12 months, and the years that follow.
That is what this post focuses on: The World After the Virus. Through 11 predictions, I envision how our lives may be made different by Covid-19, sparking new trends, catalyzing political uprisings, and sharpening our quest for meaning amidst mayhem. My hope is that this food for thought may provoke some circumspection, frame potential opportunities, and encourage long-term thinking.
1. The Asterisk Season*
The NBA and NHL are suspended indefinitely. The MLB has delayed the start of its regular season. The Premier League, Serie A, Liga, Bundesliga, and Champions League have shutdown. Credit to the leagues for acting in the interest of public health, despite the fact that it poses an impossible quandary. As a follower of soccer, I am most familiar with the specifics of the Premier League, though the contours of the problem remain the same across sports: how can champions be crowned if games are not played?
A number of imperfect suggestions have arisen to address the matter in the Premier League over the past few days. These include playing out the rest of the season in the warmer summer months (this would necessitate pushing the Euros and Copa America tournaments), crowning a champion based on current standings, or declaring the season “null and void.” Crowning champions based on current standings would create huge controversy in Serie A in which Juventus leads Lazio by 1pt, and La Liga in which Barcelona leads Real Madrid by 2pts. Voiding the season would cause an uproar in England with Liverpool 25pts clear and on track to win their first ever Premier League title.
The matter is only complicated further when looking at knockout tournaments. When June comes around, should the Bucks and Lakers waltz straight to the Finals? Should the Bruins and Capitals, Blues and Knights get fast-tracked to Stanley Cup contention?
There are no good answers. Like the “Wartime League” — Britain’s sporting solution to WW2 — any team fortunate enough to lift a trophy may have their spoils somewhat tarnished. 2020 will be the year of the Champion*.
2. Quibi breaks out
The Katzenberg/Whitman vanity vehicle was destined to fail. Raising $1.8B pre-product? Absurd. Entering a content war with Disney and Netflix, both deeper-pocketed and garlanded with unique IP? Brave. Getting sued for one of the few intriguing product features before anyone’s had a chance to use it? Foolish. Actually choosing the name quee-bee? C’mon.
In my mind, Quibi’s meltdown was a mortal lock, another startup rendition of the Icarus myth: grand designs, meet reality.
What a difference seven days make. Assuming the QuiMachine can shrug off Eko’s legal claims, the company’s April 6th launch may be the best timed debut in recent memory. With a slate of over 50 shows, Quibi has sufficient content to soak up the slack moments in our days and distract from impending doom. Critically, the platform has geared itself around daily episodes, often with buzz-generating hooks: Steven Spielberg’s contribution After Dark can only be watched once the sun sets. These characteristics could not be better suited for the current moment as consumers look for structure, consistency, and shared experience. With Game of Thrones in the rearview, Quibi may be the closest we get to appointment-viewing.
Should Quibi deliver on those fronts, it could emulate the fervor of 2017-vintage HQ Trivia. With significantly sharper management at the helm, they may be able to ride the buzz and build something that lasts.
3. Remote voting takes center-stage
By the time America heads to the polls, coronavirus may have returned. If it acts similarly to influenza and SARS, summer should ease Covid-19’s transmission, while colder weather resurrects its spread. Last November, the national average temperature was 41F, with a nationally averaged maximum temperature of 52.5F. Given that coronavirus has spread most easily in countries with climates between 41–52F, those American that want to cast their ballots in person may have to brave something of the virus’s perfect storm: cool temperatures and crowds.
In an ordinary election year this would lead to the most depressed turnout since Calvin Coolidge sent the electorate to sleep in 1924. But after bungling the response to the virus and overseeing a deepening recession, the stakes of a Trump re-election will be too high to deter Democrats. Republicans may have incentives beyond defending their pick. One possible scenario is that after pinning the administration’s failings on human-elevator-music Pence — already set up as the fall guy — Trump invigorates his base by tapping Nikki Haley for VP. The result is solid participation on both sides of the aisle, despite the health risks posed. This is significantly aided by a sharp uptick in absentee voting. With insufficient time to build and trial a software solution, states adopt “no excuse” absentee voting by mail, currently only permitted in 27 states and DC. That leads to the percentage of mail or absentee votes topping 30%, up from 23.6% in 2016.
In the wake of the coronavirus, it will be clear that having a reliable, scalable, and remote voting system is an imperative. I would imagine that in the two years after the election, we’ll see online voting systems trialed in local contests, before a solution is picked as a last-resort for the 2022 Midterms.
4. Wellness fanatics flee to trusted brands
“May you and your family bathe in Purell.”
In a hundred years, that may be an anachronistic blessing no one quite knows the origins of; for the next twelve months, it may be the kindest benediction we can bestow upon each other. As we seek certainty amidst the crisis, customers will shift spend from the vague beguilements of the latest sans-serif consumer brand and return to trusted products with proven efficacy. We are seeing this already with Purell selling for 10x its usual price, and Proctor & Gamble weathering the bear market comparatively well. The stock is down just 9.57% over the last month, while the S&P 500 has slipped 19.80%.
For the $4.2T wellness industry, Covid-19 will be a reckoning. For much of the last decade, glossy products have made vague pronouncements about the benefits of homeopathy, natural remedies, fad diets, and herbal cures, winning risk-tolerant buyers willing to take a punt on something new. A laissez-faire FDA has allowed unverified claims under the Dietary Supplement Health and Education Act (DSHEA), providing a disclaimer is included.
No more. As brands are forced to prove their worth, tried-and-true stalwarts will win back share from their trendier successors; chemicals be damned.
5. Doordash delays, and flourishes
The markets had spoken. Money-burning, operationally-intensive businesses like Uber and Lyft had been overvalued by private investors and must now prove themselves under the sober gaze of a more circumspect class of financiers. Why should Doordash, in a knife-fight with Grubhub, Uber Eats, and Postmates, be any different?
Consider this a Quibi volte face in miniature: after the markets settle, Doordash may have a chance to exit with dignity. In January, China’s food ordering increased 20% from the year before. In February, 21% of Americans ordered food online, up from 18% in 2019; that has surely shot up since. While meeting the company’s last valuation of $13B may be a bridge too far, a few months of over-performance could do Doordash’s public prospects the world of good.
Just as importantly, the company now has a story: Doordash isn’t a nice to have, it’s a must have; when the world shuts down, when the streets are barren, we still run; this is a logistics business staffed by “first responders”; we are a utility, not a luxury. If conditions allow, summer may be the perfect time to ring the bell: memories of lockdown still fresh, traction up and to the right, and the specter of COVID’s return hinting at a gangbusters end of year.
6. Gig workers have their “Great Upheaval” moment
Employees of the Baltimore & Ohio Railroad (B&O) had reached their boiling point. Over the prior year, their wages had been cut three times, the latest a 10% reduction. On July 14, 1887, they decided to do something about it, stopping work and blocking trains from leaving the station in Martinsburg, West Virginia until salaries were restored to their former rate.
The 45 days that followed saw the strike spread across 6 states with over 100K coming together, despite the fact that they were not organized by a labor union. Buildings were burned, trains destroyed, and dozens killed in riots. The National Guard was deployed, followed by federal troops. By the time fall came around, the strike was over. And while wages were not increased by the railway companies in the short-term, B&O established a relief fund and pension plan less than two years later. Even more importantly, the movement inspired the creation of The Knights of Labor, and Samuel Gomper’s American Federation of Labor. The former campaigned for the 8-hour workday, among other proposals; the latter were vocal proponents of women’s suffrage.
Gig workers may never have more leverage than right now. With a not-quite-believable 55MM gig workers in the US — including ~900K Uber drivers, ~1.4MM Lyft drivers, and +100K Doordash “Dashers,” — any coordinated action would dwarf 1877’s “Great Upheaval.” Seemingly in recognition of the favorable bargaining position in which workers find themselves, these companies have rolled out sick day policies, typically providing 14 days of pay for workers affected by the virus.
This is thin gruel. Indeed, Congress’s coronavirus bill seems to shift responsibility from these companies to the federal government, a necessary solution in the short-term, but no safeguard after the crisis has abated. If workers are to win enduring healthcare coverage, sick pay, and other benefits, a summer interlude may provide the ideal opportunity to push the case for a more permanent safety net. It may even serve as the catalyst for a broader gig economy movement.
7. AVs get looped in
That leverage will not last forever, particularly given the imperfection of human hardware. Just as this may be a defining moment for gig workers, it may be an equally critical period for autonomous vehicle operators. The modern scab is a machine.
One of the companies to benefit from the outbreak is Neolix, a provider of autonomous vans. The Chinese company has seen demand surge with 200 new units purchased; since beginning manufacturing in May of 2019, the company had only sold 125 units. Much of the cost is being borne by Chinese authorities willing to subsidize 60% of the purchase price. Already, the vehicles have proven their worth, delivering supplies within hospitals, disinfecting streets, and dropping off groceries in quarantined neighborhoods.
These are ideal conditions for AVs to be tested. Training data can still be gathered but thanks to empty roads, the risk of collision is minimal. Just as critically, by launching in a crisis, these vehicles may receive a different reception. Rather than being viewed as strikebreakers or job-eaters, they earn appreciation for their unique capacity to protect humans from peril while keeping the system functioning.
Should a quarantine befall America’s cities, expect to see vehicles from companies like Nuro take to the streets.
8. Production bottleneck recasts Oscars
The average Hollywood comedy takes close to 800 days to go from first announcement to finishing post-production. Dramas take closer to 850 days, while adventure films take roughly 3 years. Shooting itself can take 120 days, with additional time taken up by pre-production work.
The coronavirus has already made its presence felt in Hollywood with the release dates for Mulan, the next James Bond, and an addition to the X-Men franchise all getting pushed. Production has been halted on a number of high-profile projects including a live-action Little Mermaid remake, Mission: Impossible 7, Tom Hanks’s Elvis biopic, Guillermo del Toro’s Nightmare Alley, and others. TV programs like The Morning Show, Stranger Things, and Russian Doll have also paused filming.
The lag on these projects and those that follow will lead to a noticeably different set of Oscar and Emmy nominees in 2022 and 2023. As studios deal with a thinner slate, many will turn to the international market, as well as domestic independent films. Without a digital channel of their own, old world players like SONY and Lionsgate will be less willing buyers, while Netflix, Disney, and Warner (through HBO) will happily spend on smaller budget projects with promise. The result will be greater concentration of nominations on the studio side, but significantly more diversity down the ticket. Expect Netflix, Disney and Warner’s share of nominations to be closer to 65% a few years from now (up from ~51% in 2020), powered by a wave of new, diverse voices.
9. Manufacturing decentralizes, does not come home (yet)
The coronavirus may do more than delay the newest Apple product or Pixel phone. Over the past few years, 97% of US antibiotics have been supplied by Chinese firms. The States is similarly reliant on the country for vitamin C, ibuprofen, hydrocortisone, and other critical pharmaceuticals. Generic birth control, AIDS medication, antidepressants, and diabetes treatments are also manufactured in China. Should the outbreak continue to diminish operating capacity, the US may find itself facing a drug shortage just as supplies are needed most.
US reliance on Chinese manufacturing is not limited to pharmaceuticals, impacting sectors from apparel to automobiles. As alluded to above, electronics are also affected, with roughly 40% of all finished goods and 60% of component parts (i.e.: cameras used in smartphones), coming from China.
In his collection Self-Reliance and Other Essays, Ralph Waldo Emerson railed against the softening effect of modern life noting, “The civilized man has built a coach, but has lost the use of his feet.” Faced with disruptions, US companies will rethink their lack of control…and do little. Instead, they’ll continue to decentralize operations away from China to other low-cost centers like Bangladesh, Vietnam, and Cambodia, albeit at a quicker pace. To date, this has been the true legacy of Trump’s protectionism: a diversification away from China, but with little manufacturing returning home. As a hedge, companies will increase the amount of inventory they keep on hand, allowing them to better weather interruptions.
Whether manufacturing does reshore in the future may depend on how regular disturbances like Covid-19 become over the next few years. Some companies have already begun to take precautions: French pharmaceutical behemoth Sanofi has announced plans to build a new facility in France. “[The factory] would help to balance the industry’s heavy reliance on [drug ingredients] sourced from the Asian region.”
For the time being, expect American enterprises to spread risk as cheaply as possible; true self-reliance may have to wait.
10. ESPN embraces esports
The first esports final shown on ESPN did not endear itself to viewers. The 2015 Heroes of the Storm clash between UC Berkeley and Arizona State left spectators confused, with the network trending on Twitter thanks to an outpouring of online snark. Three years later, the network turned to Overwatch, showcasing the Grand Finals on ESPN 2, earning 215K viewers. The Sunday night recap on ABC saw 358K tune in. Far from remarkable viewing figures, but indicative of burgeoning interest, especially since no previous matches had been shown.
ESPN may have little choice but to give esports a proper chance this time around. With sports leagues frozen and 24 hours to fill, the network is apparently scrambling to make up the content shortfall. NFL free agency drama might provide some interest, as will the 88 “30 for 30” documentaries, currently living behind the ESPN+ paywall. Both will eventually wear thin. With a reported ~25MM spectators in the US and 453MM globally, esports has roughly the same following as golf (450MM). Teams have already taken steps to use the medium as a diversion with the Phoenix Suns announcing they will play the rest of their season out on NBA 2K.
The current hiatus could give viewers the necessary time to invest in specific teams, players, rivalries and embed themselves in the storylines and history of a rich and absorbing subculture. Out of crisis, ESPN may end up creating a new generation of fans.
11. A return to religion
The last decade has seen America stray from God’s light, the next few years may see some rapprochement. According to Pew Research, 40% of millennials are unaffiliated to any religion, with a further 10% adhering to a non-Christian faith. From 2007 to 2019, “religious nones” rose from 16% to 26%.
But as Kierkegaard wrote, “Faith sees best in the dark.” Religion thrives in adversity, as illustrated by the increase in faith shown by those struck by natural disaster between 1991–2009. Inhabitants of districts hit by earthquakes were up to 9x more likely to consider themselves a religious person, compared to those in unaffected areas. Typically the non-religious do not convert, rather, those with loose faith intensify their beliefs. After September 11th, 90% of Americans reported turning to religion as a coping mechanism. Interestingly, this faith may be something of an inheritance: children of those affected by disasters are also more devout.
We are seeing some religious groups adapt and fill the void already, streaming services live. Digitally-savvy churches like Chruchome, favored by Justin Bieber, saw a 60% increase in app-downloads, and 23% bump for its virtual Sunday service. This may present an opportunity; as Zoom cements itself as the default conferencing tool, upstarts may be able to carve off market share by focusing on a sector. Religious services may be a particularly interesting vector to attack: $2T is spent by people of faith in the US each year, with few specialized solutions in market. Integrating religious text annotation, hymnal lyrics and sound, and in-ceremony donations could all differentiate from generics like Zoom and Google Hangouts. Existing providers like Church Online were founded over a decade ago.
There will be trouble in this return, too. Religion is, at its core, a form of tribalism and in/out group dynamics lead to discrimination and sectoral violence. Voltaire: “If we believe absurdities, we shall commit atrocities.” After the outbreak of the Spanish Flu in 1918, several religious groups explained the spate of deaths in terms of a vengeful God punishing earthly sins, while some indigenous African faiths used it as an opportunity to seek out and execute witches. While thankfully not of the same severity, we are seeing some devotees act against the public interest: the Greek Orthodox Church declared that “as a matter of doctrine” the coronavirus cannot be transmitted by receiving communion; Iranian worshippers licked the gates of a holy shrine.
We are living in strange times. For many, God will be a part of persisting amidst chaos.
If you’d like to read analysis of emerging trends, changing markets, and new companies, sign up here.