The New, New World Order

For all the doomsday and apocalyptic posts available to pore over in the age of coronavirus, the following read is not one of them. Instead, this is a post about pattern recognition and mean reversion, but as it relates to human behavior, and cycles; a view on how things will look going forward ranging from the economy to sports to healthcare and beyond. Please note, I am not an expert in cognitive sciences, history, or alethiology, just an armchair epistemologist, not to be confused with an armchair epidemiologist.

Most of the topics below appear as predictions, however, without any skin in the game, predictions are largely useless, as the predictor has nothing to lose by simply asserting a prediction and it turning out to be wrong, especially in a time where fact-checking or accountability is less important than the next tweet or viral meme.

“Those who have knowledge don’t predict. Those who predict don’t have knowledge.”

− Lao Tzu

Instead of predicting what’s next, I attempt to map patterns from the past into the present tense to have a shot at what is likely to come in the near future, admitting there is simply no way to know with absolute certainty but patterns, by definition, repeat themselves and history tends to rhyme.

For the more visual learners out there, imagine a pendulum swinging back and forth over time. One of the assertions I make below is that we’ve reached “peak cities” and that the beginning of an exodus outside of large metropolitan areas to houses in the suburbs and even some rural areas is likely upon us. The pendulum swung over the past 25 years from suburban living, into largely gentrified condos within major cities. The pendulum is likely going to start swinging back the other direction.

Localism

The beginning of the end of globalization has begun.

For 40 years now the United States has dismantled international trade barriers and businesses have focused more on the financialization of their businesses through accounting wizardry, the legalization of stock buybacks in 1982 (thus supporting one of the first of many mispriced asset bubbles), and the heralding of CEOs like Jack Welch as a Wall Street darling by inflating the company’s stock price at all costs but largely sinking the company’s long term hopes of remaining competitive. Welch closed factories, reduced R&D and terminated 112,000 employees from 1980 to 1985. 40% of GE’s market capitalization at its peak came from its financial services arm, GE Capital.

Unfortunately, that didn’t work out for them.

The Result of Financial Engineering — GE’s Stock Price Since 1980

“Financialization has polluted the entire physical investment process, the labor markets, and the innovation cycle of firms. The damage it inflicts on investments in physical and human capital is hugely important, because that’s what slows down growth.”

− Andrew Haldane, Chief Economist of the Bank of England

Back in the 1960s and ’70s, companies invested about 40% of each additional earned or borrowed dollar into the real economy. Since the Reagan era began, all of that has largely gone into the stock market.

Companies have largely focused on developing the cheapest possible product for the largest consumer base while hiring MBAs and consultants to help drum up additional alpha to prop up their share price. The result? Fewer manufacturing plants stayed open in the United States and supply chain innovation largely moved offshore. The U.S. is still a major manufacturer of industrial goods like petroleum and steel, but the factory worker assembling desks or sewing clothing is mostly nonexistent.

Given the stranglehold on the global supply chain the coronavirus has created, self-sufficiency and domestic manufacturing is now a national security interest. The pendulum of cheap labor and goods outside of the country is now swinging back towards the homeland.

“Made in America” is an appropriate meme for the recent rise in populism spearheaded by Steve Bannon and the Trump administration. The populist momentum will likely act as a tailwind to making in America. In fact, one of Trump’s economic advisors, Larry Kudlow, recently floated the idea of “paying the moving costs” for companies to leave China and come home. This is not a partisan issue. Matthew Stoller, a Liberal Democrat, shares a similar view on securing our supply chain, bringing manufacturing home, and decoupling from China.

Therefore, it is very likely domestic manufacturing is set to return to the US, which means prices of goods will go up, or commonly known as inflation.

The Roaring 20s of Inflation

Assuming domestic manufacturing picks up, prices will be going up along with it. Why? Well, a factory worker in Shenzhen is less expensive than a factory worker in say Columbus, Ohio. That’s the simple reason.

Monetary policymakers have been enjoying a steady decline in inflation since, you guessed it, the beginning of the Reagan era.

For 40 years, inflation has been dropping and consumers have rejoiced. Prices for goods have remained incredibly cheap, but risky assets, like houses and stocks, not so much.

You may be thinking, if prices go up and the consumer has less money because of a fractured economy, how do people afford to buy anything?

Let me tell you about Universal Basic Income or UBI.

In the short term, UBI will be the backstop for the initial consumer “sticker shock” from higher prices as well as the impact of automation managing the majority of manufacturing jobs. Yes, manufacturing will likely be coming back to the United States, but most of those jobs will be automated.

Once the UBI ball gets rolling, there is no stopping it, no takebacks. It would be political suicide for a politician to stop paying people to feed their families with their “stimulus checks”. Nearly overnight, the “fiscally responsible” party and current administration went from fighting anything remotely associated with socialism to directly depositing money into citizens’ bank accounts. The about-face is striking, but let’s be clear once you turn on the socialism spigot, it does not get turned off and in fact, only gushes. Quantitative easing (QE) is the canonical example, but it is socialism for the wealthy, not everyone else. Socialism for the rich leads to socialism for all and here we are.

QE ∞

In 2008, the Federal Reserve, aka “the Fed”, enacted its first round, QE1, of quantitative easing by purchasing government bonds, mortgage-backed securities, and other assets to add money directly into the economy. By June 2010, the Fed held $2.1 trillion worth of assets on its balance sheet.

Ben Bernanke, the Fed Chairman during the global financial crisis, was convinced that over the long term, his policy would be net-positive for easing the strain on the financial system and would become a tool beyond cutting interest rates to stimulate the economy either in crisis or post-crisis. However, QE was still an experiment that we are now seeing play out quite differently than expected.

QE coupled with the bank bailouts (and eventually General Motors) were deemed necessary at the time to bring order back to markets and instill confidence in the banks and ultimately, consumers. However, cheap money now flooded the markets and with interest rates at zero, the goal of money was not to save it (you earn nothing at 0%) but to spend it, to stimulate the economy. Recall, more than ⅔’s of the country’s GDP is based on consumer spending.

The problem with artificially stimulating the economy by expanding the money supply is that savers can’t save for retirement safely or with little to no risk — they must invest in riskier assets to get a return, hence the meteoric rise seen over the past decade in the housing market, stock markets, venture-backed startups, etc.

And our multi-asset bubble is now growing…

In late February 2020, after 11 years of bidding up risk assets, we began to witness the unraveling of markets that were radically and resoundingly mispriced. The fastest 30%+ drop in the stock market ever recorded as well as one of the most extreme moves in the bond markets ever both occurred, rattling global markets and nearly nuking a number of prominent “risk parity” hedge funds in the process. Don’t fret, they were bailed out first.

Since then, Fed Chairman, Jerome Powell, took what Bernanke started and injected it with steroids. Not only has Powell dramatically increased the Fed’s balance sheet, but he is also expanding the types of assets the Fed can purchase, including, junk-rated bonds. That’s right, junk.

The Fed also announced it would purchase an “unlimited amount” of Treasuries and mortgage-backed securities in order to support the financial market. Once you put QE in motion, it doesn’t stop and it requires more and more to satisfy its needs.

QE infinity is the logical conclusion of QE1.

This same pattern applies to UBI.

UBI1 leads to UBI infinity.

The Fed’s aggressive monetary policy now completely eliminates accurate price discovery/valuation models for businesses. It is clear: The Fed will simply backstop anything they deem risky to economic growth. They will go further down the capital structure, junk bonds, to bailout these businesses. All those economic formulas for valuing companies taught in business school are now meaningless.

To put another way, the Fed is juicing socialism for the rich by propping up and rewarding CEOs of publicly traded companies for poorly managing risk and not allowing them to fail.

By moving further down the capital structure, the Fed is backstopping preferred investors in private businesses and thus ultimately propping up their share prices. Why? Here’s a simple example.

Let’s assume Boeing is headed for bankruptcy. In a restructuring, equity shareholders get wiped out first as they are at the bottom of the capital structure. Those higher up the structure lose less, if at all. So let’s say you’re a Boeing 2030 (that’s the year) bondholder and you’re worried about losing money on your investment if the company fails. What will you do? You’ll sell the bond to cut your losses.

Now, imagine the Federal Reserve is there to catch you by purchasing those bonds. You got bailed out.

Guess who owns those bonds today? The wealthy (for the most part).

But since credit holders are more or less guaranteed their Boeing bonds will be worth money, the likelihood of the company failing drops and then this is reflected in the share price. So equity holders rejoice! The value of their Boeing stock will continue to rise.

Unfortunately, 92% of all stocks are owned by only 20% of Americans, and the chasm between the rich and poor widens even further.

Nationalization by Proxy

In France, the national airline, Air France, is, well, a nationalized airline. How un-American that would be to do here at home! We would never do that to our industry titans as that would be socialist and anti-capitalist, right? Yet given the Fed’s new, expanded QE policy, we now have “nationalization by proxy”.

Take airlines, for example. Over the past 40 years, the airline industry has seen an extreme level of consolidation amongst the large carriers. Consumers now mostly have a choice of three major airlines to choose from when flying: United, Delta, and American Airlines.

Now, what if all of those airlines were to fail at the same time? This would have a devastating effect on the economy so it is only natural to act in order to support them.

But politicians can’t sleep well at night if they simply nationalized an entire industry or a set of companies within an industry. How un-American?!

So instead of directly nationalizing them, let’s indirectly do so by propping them up financially by having the Fed purchase deeper down the capital structure (junk bonds). Instead of the companies failing or going into bankruptcy, the business can continue, as usual, knowing the Federal government is backstopping them at the capital level with no restrictions or recourse for bad actors or poor management. These airlines remain “American” in a sense that we don’t directly nationalize them, and politicians can save face that we “aren’t France.”

What companies get bailed out? Companies that an entire industry depends on (Boeing).

What industries get bailed out? Industries that other industries depend on (Airlines).

National Healthcare Is National Security

Let’s recap. We have UBI. We have nationalization of companies, by proxy. The only item missing is universal healthcare.

But how can we spin this so that the past 40 years of political talking points rallying against a national healthcare system actually hold up? Political donors are not going to die from an invisible enemy because they want to toe the party line. Instead, just make it a national security interest.

The US is armed to the teeth. Nearly half of all civilian firearms worldwide are in the hands of American citizens and we outspend everyone on defense by an order of magnitude.

Yet an invisible enemy that can’t be shot or drone-bombed is what has brought the country to its knees.

How do we defend against this going forward? Universal immunity.

The United States will finally have to create a national healthcare plan that will still appear driven by for-profit, private companies (nationalization by proxy) to protect our nation from a viral attack in the future. Microbes are this decade’s terrorists.

Healthcare and medical regulations will be razed. Privacy will be stripped, but all in the name of national security. We’ve seen this pattern before.

Recall the US over-indexed on the 9/11 attacks by starting two wars in two foreign countries, but Congress also passed the Patriot Act at home.

Many medical facilities today are completely ill-equipped to respond to a massive healthcare crisis, be it a virus or not. Imagine our troops at a base in Afghanistan not having enough ammunition to fire from their guns. We would never allow that to happen. How can we allow our doctors and nurses to not have their “ammunition” to fight our latest threat here at home?

The coronavirus has pinpointed a major weakness in the United States’ national defense: its healthcare system. Every terrorist organization on Earth now has the playbook for how to successfully attack the United States — unleash a virus.

You may be thinking it is not that simple to just “unleash a virus” yet that’s exactly what likely happened, albeit indirectly, as the odds of President Xi of China intentionally releasing the coronavirus and subsequently nuking the global economy while bringing instability to his country, a country that craves stability, is highly unlikely.

How could a rogue state or terrorist organization create a deadly virus? Publicly available, scientific research provides all the information necessary. In fact, in 2015, research specific to what is now known as the SARS-CoV-2 virus was published by Ralph Baric and concerns from industry peers were raised about the virus’s potentially catastrophic potential.

“If the virus escaped, nobody could predict the trajectory.”

− Simon Wain-Hobson, a virologist at the Pasteur Institute in Paris

Since there is no way to halt academic research entirely or retract research that has already been published, the United States must play defense as opposed to offense. And the defense, in this case, is an immune population and a well-stocked, highly organized and logistically efficient healthcare system.

National Healthcare is National Security.

When a vaccine for coronavirus is finally available, and testing procedures are rolled out en masse, the next question asked by your employer, your TSA agent, or restaurant owner is “are you immune”? But talk is cheap. You need to prove it.

Proof of Health

Today, if you want to fly on an airplane (beyond one’s own private jet), you have to prove your identity — a passport or driver’s license is usually sufficient. But if your name is on a terrorist watch list, you can’t board the plane.

So how do we know passengers flying into JFK from Paris are not hosting a “terrorist microbe” — a virus?

I suspect a “proof of immunity” or “proof of health” will be required by not just all passengers looking to board a flight, but sports fans entering an arena, attendees of technology conferences, cruise ship voyagers, etc. Much like how a metal detector disables and dissuades gun-toting folks from entering a music venue, body temperature, and thermal screening and eventually, nearly instantaneous serological testing may become the norm. In Wuhan, these types of testing procedures are already underway for workers looking to head back to the office or factory.

Eventually, the likely best case for validating immunity to the COVID-19 disease is to confirm or deny someone has received the vaccine (after it has been developed and deployed at scale).

As an extension of your proof of identity, your proof of health likely becomes even more important than proving who you are. Yet just like fake I.D.’s, fraudulent claims of wellness or vaccination will be rampant and since there currently exists no globally recognized standard for proof of health, one must be created.

Trust Less and Verify

There’s an inside joke in open source software development that the challenge with any open standard is there are so many to choose from. Take USB, you know, the Universal Serial Bus. Why do we have so many types of universal solutions? USB micro, mini, A, B, and C?

Now, imagine trying to get every country’s head of state and healthcare leadership to all align on a universal standard for proving one’s immunity.

Easy, right?

Now try to imagine ensuring every country will implement according to this agreed-upon standard.

Piece of cake.

Now try to imagine every country trusting every other country.

Yeah, no.

If the proof of a citizen’s healthcare data is stored within a nation-state’s data center or even a for-profit cloud provider like Amazon’s AWS or Microsoft’s Azure, how can the border patrol agent know for certain that the scan of a person’s proof of health certificate is valid? They can’t.

Instead of relying on a centralized authority to ensure that someone’s health data has not been modified, tampered with or even reliably available, the proof of one’s health must remain on a decentralized, peer-to-peer distributed ledger, also known as a public blockchain.

Posit: your proof of immunity is hashed and stored as a valid transaction on a public chain. These chains are fault-tolerant, globally redundant, tamper-proof and peer-to-peer, meaning, no centralized authority or regime can coerce or destroy them. Proof of health may be the first real-world use case backed by proof of stake.

We need baby steps to get there but Apple and Google have recently teamed up to kick off the process of evolving smartphone usage and consumer behavior to contribute to global health and immunity via contact tracing. And yes, privacy is a major concern, but at least they are committing to strong cryptography in its implementation.

Medical Facilities 2.0

Recently, I needed an MRI to either confirm or deny I had re-torn my ACL in my right knee. The process was mind-numbingly archaic. I’ll spare you the details, but what struck me as entirely backward was that I was given the MRI images on a CD-ROM. I haven’t had an optical drive in my computer in at least a decade so I asked if they could simply email them to me. They could not. By the way, this occurred in San Francisco, the epicenter of technological innovation.

Medical facilities have been left behind technologically as nearly every other industry has gone through its own digital transformation. Even finance, typically one of the most conservative industries as it relates to change, has dramatically improved its technological prowess as evidenced by its ability to adapt to a remote and isolated work environment nearly overnight since coronavirus struck the U.S. Goldman Sachs noted that 98% of their entire workforce is now working remotely. The CEO of Morgan Stanley is even reconsidering their office real estate portfolio as he states “We’ve proven we can operate with effectively no footprint.” More on this later.

Yet medical practitioners and supporting staff workers can’t simply work from home (yet), but there is no reason facilities don’t need to resemble an old episode of ER. How is it that we know the number of available parking spots in a Whole Foods parking lot but we don’t know how many ICU beds are in a hospital?

By prioritizing national health as a national security issue, existing businesses and new startups can serve the digital transformation and reinforcement efforts of our nation’s medical facilities. Unlike the aftermath of the global financial crisis where more regulation was added to the financial sector, decades of regulation will get stripped, enticing even more investment dollars to flow to this modernization work.

The task will be herculean, but if Americans share the common interest of defeating the enemy (the virus and future viruses), we will likely see a rally around the fortification of our hospitals which likely enables many folks to go back to work or get a new job altogether in “healthcare defense”.

Working Class Division — Cloud vs. Land

The effects of the nearly national shutdown of the U.S. economy has exposed the fragility of the labor market as over 20 million Americans filed for unemployment benefits within the first four weeks of the shelter-in-place or stay-at-home ordinances, a breathtaking number. Estimates place the unemployment rate between 18 and 20%, a rate unfathomable just a couple months ago.

What’s more telling though is the folks that have remained employed and namely, the types of jobs they have.

The majority of “white-collar” jobs have largely moved from an office to a work-from-home environment as normally in-person meetings can actually be conducted over video conference using products like Zoom, Google Hangouts or Microsoft Teams. Email and messaging has always been asynchronous. A phone call is a last resort. The majority of these workers’ day-to-day tasks are facilitated and managed in the cloud.

On the other hand, “essential businesses” that have remained open are largely “blue-collar” jobs, particularly delivery people. InstacartWalmart, and Amazon are all hiring in the hundreds of thousands to support overwhelming demand for delivery of goods ranging from kids’ puzzles to groceries. The majority of these workers’ day-to-day tasks happen on land.

And there you have it. The latest iteration of the workforce dividing line; what was once the color of your collar is now whether or not you work on land.

A silver lining for the land workers may be a resurgence in unionization as it appears the 60+ year decline in union membership started to bottom around 2016 with an uptick in union membership, mainly driven by Millenials, gaining momentum.

The virus has forced companies to react quickly to the demands of their employees and/or contractors. Workers at Amazon and gig workers for Instacart have staged strikes, requesting personal protective equipment while on the job and health and financial support if they were to get infected with the virus. In fact, a new labor union altogether, Gig Workers Collective, is seeking 501(c)(3) non-profit status and aims to be the “focus to the fight for fair pay and better treatment for all gig economy workers, from Instacart Shoppers to Lyft Drivers.” The pendulum towards labor rights appears to be swinging back.

Excess Capacity ➡ On-Demand, Corporate Office Edition

Over the past 12+ years, we’ve seen a desire by consumers and eventually businesses to reduce the need for idle, or excess capacity of goods or services and move more towards greater efficiency through on-demand usage.

Take Uber. Or Airbnb. Or even cloud computing. Or even one step further, ephemeral or serverless computing. This major shift has completely disrupted entire industries (e.g. taxis) while also training consumers to expect an on-demand, “lease-able” lifestyle.

Yet this trend hasn’t been adopted by the commercial real estate and office space sector. WeWork attempted to create cheaper office space, but their model didn’t necessarily pan out as their business was less about utilizing excess capacity and more about abstracting away the pain of leasing office space. Breather, on the other hand, has been thriving riding the trend of on-demand workspaces, available by the hour.

However, Breather’s target audience isn’t Morgan Stanley or AT&T. And now that so many of these businesses’ employees work “in the cloud” the leadership teams are starting to take a hard look at the need for idle capacity — dedicated desks and offices are not only wasteful but a liability.

Imagine a company’s current work-from-home requirement is rescinded and everyone is requested to come back to work only to have someone infect one or dozens of other employees with a deadly virus. The legal risks here are enormous and likely precedent-setting.

I suspect we see many businesses that have cloud workers meet only on an as-needed basis, which will still without a doubt occur, but the days of white-collar workers being required to go to the office from 9 AM to 5 PM, Monday through Friday are long gone.

What’s the impact on commercial real estate? It’s anyone’s guess but if the shopping malls are a leading indicator of what happens when a “bricks and mortar” core business moves to the cloud, the outlook is not rosy.

Vocational Training Thrives, Universities Unwind

Forcing workers to come back to the office is not just a legal liability for businesses, but it’s a huge risk for colleges and universities as well. Imagine requiring students to sit in a lecture hall surrounded by potential hosts of a lethal pathogen: fellow students. But the virus is only the first of many issues facing traditional higher education.

First, the cost of a college education continues to rise and is largely unaffordable for most students, forcing many of them to take on substantial debt to obtain even a bachelor’s degree. The student loan debt itself is now a monster bubble eclipsing $1.641 trillion as of the end of 2019.

Moreover, “prestigious universities” have recently been held accountable by the Federal government as many well-to-do parents have been indicted and prosecuted for bribing their kids into these exclusive schools.

The shine reflecting from a student’s degree from Stanford or Yale is still bright but it has certainly lost a bit of its luster given the negative press and high cost of attendance.

As more and more students recognize the new division of labor spectrum (cloud versus land) and look at the option of entering the newly revived domestic manufacturing industry or even the healthcare defense sector, will a journalism degree from NYU with over $150,000 in debt be nearly as attractive?

Massive open online courses or MOOCs (pronounced MOOKS) have been growing exponentially over the past decade in terms of attendees and areas of study. You can now get a master’s degree or a professional certificate in myriad subjects.

MOOC attendance will only accelerate post-coronavirus as more and more remote learning takes place at the primary education level but more importantly, these MOOCs can reach a much wider audience for a fraction of the cost and entirely eliminate the healthcare risks associated with students corralling in a lecture hall. As a bonus, MOOCs can leverage the benefits of modern technology including artificial intelligence services like automatic language translation and improved accessibility features for visually and/or dexterity impaired individuals.

Yet higher education is only one half of the puzzle — re-training our workforce on modern manufacturing techniques and machinery and robotics operation is a vocational skill that will be desperately needed.

Imagine trying to build an iPhone at home. The requirements are not just the will to manufacture at home and also obtaining the raw materials like rare earth elements, but factory workers need to understand how to assemble using state-of-the-art machinery. The U.S. is way behind here.

If the U.S. is serious about securing its supply chain via domestic manufacturing, workers need to be trained and re-trained at a massive scale using the latest technologies and techniques. China has mastered the modern factory automation line. It’s as if the U.S. would need to conduct industrial espionage on the Chinese to even understand how to efficiently manufacture! An interim solution? Invest in community and vocational colleges to educate and train this new legion of factory workers.

To be clear, the upper echelon of education, the Ivy League, and the more affordable and scalable community colleges and vocational schools will still continue to thrive in the near term, but it’s the middle that will suffer, as already evidenced by the fall of Hampshire College and the closing of Concordia University.

These universities have smaller endowments but worse, many have decided to focus on vanity over a longer-term sustainable business strategy. LSU built a lazy river. The University of Akron built a lazy river as well as a 56-foot rock-climbing wall and leisure spa. Gourmet food in cafeterias is now table stakes. As a result, many more of these universities will be closing their doors as this level of excess begins to unwind.

(e)Sports and (d)Entertainment

Earlier this year, I was fortunate enough to attend the NBA All-Star game. It was emotional (the Kobe Bryant tribute), gaudy (examples of excess abound) and invigorating, given the new all-star game format. Little did I know it may be the last NBA All-Star game for quite some time. I definitely want to be wrong about this. Trust me.

But once again the legal and health risks associated with large gatherings don’t stop at the entryway to an arena or stadium. A virus doesn’t care if your team is destined to win the Super Bowl. Without thermal imaging, proof of health and/or instantaneous serological testing, I find it hard to believe thousands of people will gather in arenas to watch someone catch a ball.

The obvious solution is just to have them play their games but without spectators.

Yeah right.

Can you imagine Game 7 of the World Series, it’s the bottom of the 9th inning, with 2 outs, the home team is down by 1 run with a runner in scoring position, the count is full and the batter is ready and able to make history…to a silent stadium? The sports industry is inherently spectator driven. Even esports (video games) championships draw tens of thousands of people to arenas to watch a giant screen.

U.S. football itself may be kicking off (no pun intended) the beginning of its secular decline in popularity similar to a pattern witnessed by boxing in the 1920s when boxing as a sport peaked. The Great Depression, as well as calls against the barbarism associated with the sport, ultimately pushed boxing out of the spotlight. We’ve seen this pattern before. With the raising of awareness around the impact of smashing one’s helmet into another’s over and over again (CTE) coupled with a recession might be what it takes to reduce the demand for the nation’s favorite sport over the coming decades. I’m sure many of you will violently disagree, but secular declines take decades, not years.

Live sports was the last remaining anchor for broadcast television. 24/7 news is the only live event left and like sugar, should only be consumed in very small doses. With the cancellation of sports, we are likely to see the end of broadcast television as we know it. This is not a new concept as cord-cutters and over-the-top streaming providers like Netflix and Hulu have been gaining steam for years now. The ramifications for the advertising industry are also bleak.

Source: Scott Galloway

Movie theaters may become relics of the past similar to what drive-ins were many years ago. The idea of sitting in the dark amongst strangers and not knowing their level of immunity is likely not going to change overnight. Are you bringing your children to a theater to watch the latest version of Frozen?

Ironically, drive-ins have been thriving in the age of coronavirus while movie theaters remain entirely shut. The pendulum is swinging back.

A drive-in theater in Maal, Germany on April 6, 2020

But what about films? All production in Hollywood has been at a standstill for over a month now, which means, no new films or television shows are being produced. Historically, in times of recession, investment dollars flow into “concept development” like screenplays, but writers tend to only make up a fraction of the staff that is employed by the movie industry.

What happens if Netflix and Amazon no longer have new releases to keep their audiences hooked? The people themselves become the content creators.

It should be no surprise that we are seeing an explosion in Tik-Tok dance challenges and live streams of celebrities on Instagram in a world where there is no live TV. Tik-Tok is nearing 2 billion app installations worldwide. The number of podcast subscriptions available has doubled from 500,000 to 1M in less than two years.

For better or worse, content creation is moving away from centralized studios like Hollywood and into the hands of the citizens. Will a teenager in Seoul be able to create a masterpiece like Parasite on their mobile phone? I doubt it. But the attention will shift for the short term and Hollywood will need a strategy as more and more technology companies commoditize the production tools like special effects and sound design for the layperson.

Last but not least, music. With the cancellation of SXSW this year, the live music industry has simply imploded overnight. There is no other way to describe it as every tour, every show, and every festival is now canceled. Most promoters will never recover. Famous music venues are closing their doors for good. Maybe ravers were always one step ahead with their infamous masks.

Live Nation, a publicly-traded events promoter and venue operator, has seen its stock plunge by 40% and has cut executives’ salaries while borrowing $150M to weather the storm. It’s very difficult to see the live music industry recovering quickly and when it does, it will never look the same.

However, there is a common thread amongst all three of these major areas of entertainment — streaming.

eSports will continue to outperform relative to traditional sports as more and more “live sports” become digitally enabled. XBOX Live suffered an outage due to a massive surge in users just a few weeks ago and continues to have to throttle new registrations for certain games and experiences. With livestream networks like Twitch and Mixer, more and more players and ultimately spectators will watch gamers compete live. In fact, actual NBA players recently went head-to-head playing NBA 2K live to their fans on ESPN. The blurring of these worlds is surreal.

For film and television shows (if that’s even what they are called these days), streaming providers will continue to thrive while broadcast suffers. Video streaming providers are abundant: Netflix, Amazon, Apple TV+, Disney+, Hulu, Quibi, Roku, HBO Max, YouTube, etc. The days of owning either content or distribution are over — you must have both to compete.

Musicians are live streaming shows. DJ’s are participating in 36-hour, global live streaming marathons to listeners around the world. Silent discos extend beyond just wearing headphones and dancing around people to wearing headphones and dancing alone at home.

Video Is the New Platform

Given the surge in usage of video streaming applications and the expansion of their use cases, ranging from doctor appointments to happy hours, video will become the next major technology platform. We’ve seen this pattern before most recently with mobile phones.

For the past 12+ years, the smartphone has ushered in a new era of innovation and cutthroat competition now dominated by a duopoly between Apple and Google. The value created is in the hundreds of billions of dollars. Software developerscontent creatorsinfluencer culturemobile shoppingpayment providers and chip manufacturers are just some of the results of the smartphone platform.

For the next decade, video will be that battleground. It should be evident as to why this likely plays out if you’ve read this far, but video as a platform is still in its infancy. Zoom has an SDK for developers. So does SlackSkypeHangouts, and Teams.

Beyond software developers, a booming subculture of custom backgrounds for meetings is tipping off creatives to contribute to the space.

Remote learning is in its infancy as educators will need to completely revamp their process from lecturing, testing, grading, and reporting. Video is the medium, not a classroom.

Imagine using machine-learning to block out the sound of your dog barking in the background when the delivery person shows up or using AI to generate dropped packets and filling in the missing audio when your connection is flaky. The future is already here, it’s, as usual, not evenly distributed.

The ushering in of the iPhone and broader smartphone industry created not only the next major computing platform for technologists and those on the periphery, but it brought with it fundamental changes in human behavior that has changed the course of history.

For example, it’s hard to imagine that there was a time before the selfie existed. In 2006, the idea of using a camera to take a picture of yourself was rare. However, the iPhone changed that.

Take the front-facing camera of an iPhone and couple it with Instagram, an app that rewards you for what would normally be considered narcissistic behavior via likes and comments, and a global explosion of self-documenting behavior occurs seemingly overnight. What stemmed from such a seemingly innocent behavioral change? A lot.

Influencer culture was born. Teenage depression spiked. Smartphone addiction increased. Magazines largely shut down as Instagram became your endless, highly personalized and targeted digital Vogue, GQ, Sports Illustrated, Cosmopolitan, Economist and Playboy all wrapped in one.

Did the selfie itself cause this? Of course not, but human behavioral changes like the selfie are what I tend to look for as technology platforms materialize and expand as evidence of larger societal changes due on the horizon.

The global society changed dramatically due to what appears to be a harmless change in human behavior. What behavioral changes are coming post-coronavirus?

Our Collective Global Behavioral Change

Humans that have been in constant motion for decades have been forced to a grinding halt due to an invisible enemy that builds distrust amongst anyone who sneezes nearby. The ramifications extending from this are profound.

Have you found your stress elevated when you go to a grocery store? Did you bring your kids along?

Do you judge people if they aren’t wearing a mask?

Have you cheated a bit and driven somewhere that wasn’t essential?

Have you worked, worked out and relaxed all in the same room in your apartment?

Are you tipping delivery people more?

Did you become a delivery person?

Did you bake bread?

How about a home improvement project?

Did you build a makeshift office or actually use your home office?

When we observe major behavioral changes as a global society it creates enormous opportunity and potential as well as the end of excess and fragile ideologies, customs, and businesses.

Take influencer culture, a wildly popular industry that evolved out of the smartphone platform. Is that entire industry now dead? A very popular and affluent blogger was recently eviscerated by her followers and the media for documenting her COVID-19 testing experience and retreating to her home in the Hamptons, leaving her Manhattan residence. Another influencer simply “ran out of things to say.

What about fashion? Given the potential for severe supply chain disruption, do “fast-fashion” outlets such as Zara and H&M survive? Do humans become more industrious or do the masses continue to follow wildly overpriced fashion houses? Do athleisure lines evolve to a “WFH-leisure” line? What does your mask say about you? Are you representing your favorite sports team or Louis Vuitton? What tribe do you belong to anyway?

And speaking of tribes, another outcome of the coronavirus is that the United States’ aircraft carriers are currently immobilized. Will we experience our first mechanized war? Why put your troops in a submarine or tank when a drone can do the work for you. Besides, we have been training our youth for years with our esports competitions after all.

Last but not least, we’ve reached “peak city”. San Francisco is likely the poster child for why we will begin to see the pendulum swing away from humans migrating to densely packed cities towards migrating just outside of them, close enough to still gain some of the benefits from the city but without the extreme cost and health risks densely populated areas provide.

San Francisco is by far the most expensive city to live in the United States and yet, it is covered in feces (which is known to enable coronavirus transmission) and littered with used syringes. With the majority of jobs in SF being those “in the cloud”, why would one choose to live in a place like this?

New York City, albeit cleaner and cheaper than SF, is seeing many of its residents reconsider staying.

The pendulum is likely swinging back home, home on the range.


The behavioral changes stemming from the current and post-coronavirus will dramatically shape a number of facets of our everyday life, from work to entertainment to healthcare. There is no going back to normal. We are way past that now.

I am wildly optimistic about our future as the opportunity set now presenting itself from this crisis is a once in a lifetime opportunity, not just for business, but the arts, creativity, and humanity in general.

I’m bullish on humanity.

Send it.

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