Business as Unusual

At the time of writing, the Victorian Government has decided to defer the easing of Covid-19 restrictions, in the wake of a sudden spike in community transmissions. There was always a risk that opening up too much, too soon, would result in a second wave of coronavirus infections, as people returned to work, as shops, restaurants and bars started to re-open, and as people began socializing on a larger scale. There is even talk of more drastic local restrictions in so-called hot-spot areas.

Meanwhile, the deferment (and the extended State of Emergency) is creating further uncertainty for businesses in an already fragile economy. In recent weeks, I have been attending a number of on-line seminars on the broad theme of business in the post-pandemic era. Variously described as the “new normal”, the “new new normal”, and even the “next normal”, things are unlikely ever to be the same, and not many punters are willing to bet on the resumption of business as usual.

Here are some of the challenges and opportunities that lay ahead:

Future of Work

As employees head back to the workplace, employers will need to balance the need for productivity and business continuity with the obligation to provide a safe working environment. Some staff can’t wait to get back to the office, some will prefer to continue working from home (if they can), while a large number would probably welcome a mix between the two. This has prompted debate on introducing a 4-day working week, the introduction of team rostering (e.g., alternating one week in, one week out), and possibly the end of hot-desking.

Overall, new work practices will necessitate a re-think on office space, workplace location and employee facilities. Some commentators have predicted that companies will need to extend their current premises (to allow for adequate space per employee); while others suggest CBD workplaces may need to decentralize towards more suburban or regional hubs (to reduce commuting times, to relieve congestion on public transport and to allow people to work closer to home). The latter may also stimulate local economies as people reallocate their commuting costs and daily expenses into local shops, cafes and services.

Innovation

Change and uncertainty should drive companies to innovate – in fact, former Prime Minister Malcolm Turnbull recently spoke about innovation in light of the pandemic. His view is that current technological trends will only accelerate, and industries facing disruption will be displaced even faster. So no time for complacency, and no point waiting for normal service to resume.

Necessity has driven many retail and restaurant businesses towards more online engagement with their customers, and those that have been shown to be creative, resilient and agile appear to have found a way through the lock-down. Equally, many businesses used to delivering their services in person have had to find ways to embrace digital solutions – no doubt enhancing their digital transformation in the process.

Self-sufficiency

We’ve heard about the need for food and fuel security – especially when supply chains are disrupted, and when countries pursue “domestic first” policies in relation to essential goods and commodities.

While Australia is a net food exporter, we still have to import many daily staples. Primary producers have come to rely on lucrative export markets, so in the light of trade wars and import bans, local farmers and consumers alike will need to adjust their expectations – on choice, price, seasonal availability and market volumes.

Australia is also in the enviable position of being potentially self-sufficient in energy – but although we are rich in renewables, we are still reliant on fossil fuels, and recent events revealed our vulnerability to volatility in the oil markets. It suggests the current environmental and economic debates around weaning ourselves off coal, oil and gas are only going to become more critical.

There has also been a call for a larger domestic manufacturing base – not only to enhance workforce skills and productivity, but also to ward off supply chain disruption. Some have called for a return to domestic car production. Even if that were desirable, let alone a realistic option, I don’t imagine that anyone would welcome the bad old days of churning out Australian-made gas guzzlers that nobody wants to buy. We would need to advocate for smarter cars, energy efficient and non-fossil fuel vehicles, environmentally sustainable materials and manufacturing process, and possibly different car ownership models (in line with the trend for ride share businesses and smart city solutions) and more creative financial incentives to the industry than wholesale subsidies.

Other manufacturing sectors that are getting attention include medicines and medical supplies (surely there must be a market for domestically-produced PPE made from bio-degradable materials?), clothing (again, an opportunity for environmentally sustainable materials and manufacturing processes), processed goods (after all, we already have much of the raw material), domestic appliances and technology.

One area where Australia has also proven vulnerable is in recycling. China and the Indian Sub-continent are pushing back at taking and processing our exported waste. So we have to get smarter at recycling household waste (paper, plastic, glass and metal) especially if in a post-pandemic world we see a return to single-use items and additional sterile and protective packaging for foodstuffs and personal products. We also need to look at e-waste, and find ways to extract more recycling value from obsolete devices.

The lock-down during the pandemic has also highlighted an opportunity to re-connect with the “make do and mend” mentality of our parents and grandparents. Again, if supply chains are disrupted, buying a replacement item might not be an option. But often, nor is it possible to buy replacement parts – either they rely on the same supply chains, or there are no user-serviceable parts available. What if manufacturers and distributors had more of an obligation to take back and recycle their products, or to include more interchangeable parts in their designs, and enable consumers to become more self-sufficient in repairing and maintaining their electronic and electrical goods?

Federal, state and local governments have a huge role to play here – from mandating the use of more recycled and recyclable materials, to incentivizing recycling schemes, from supporting local repair workshops and “maker” projects, to creating more common and open standards around components and replaceable parts.

Finance and Digital Money

At a time when many people are on reduced income and/or or relying on government welfare, the pandemic has also demonstrated a need to rethink our relationship with money in general, and cash in particular.

The latest round of QE by governments and central banks to offset the financial impact of the pandemic has highlighted once again the fragility of current monetary policies, including fractional reserves and treasury buy-backs. The decision to print money on demand will only increase public appetite for crypto currencies as a legitimate store of value – including stable coins and (ironically) central bank digital currencies – and paradoxically, accelerate the removal of physical cash from the economy.

In times of crisis, digital currencies can also transfer money to remote recipients faster and cheaper than traditional means (i.e., incumbent remittance businesses, bank transfers, payment gateways), and actually increase transparency and traceability.

The lock-down also revealed that many people did not have a sufficient financial buffer to withstand job losses, especially in the casual workforce and the so-called gig economy. This suggests a new approach is required for how people are remunerated for their labour and services, taxed on their income, and incentivized to save for the future. Current systems cannot address these issues because they are over complex, far too rigid, and totally dis-empowering of the people they are designed to serve and support.

Digital currencies (along with the benefits of Blockchain technology, and the new economic models represented by digital assets and tokenization) will enhance trends such as decentralization, peer-to-peer networks, trust-less systems, fractional ownership and more sophisticated barter structures.

Bitcoin was created in response to the GFC, it has now come of age in the post-COVID-19 era.

Next week: Antler Demo Day – Rewired

 

 

 

 

 

Can we come out now?

At the time of writing, the Victorian government has just announced the State’s very own measures as part of the “3 Steps to Recovery”, designed to ease the Covid-19 lockdown restrictions, in a controlled and manageable way. This follows last week’s meeting of the National Cabinet, where broad agreement was reached on a plan to help “prepare Australians to go back to work in a COVID-19 safe environment and getting the economy back to a more sustainable level“.

Even at the MCG, the advice is stay safe, stay home, and think of others

The biggest “winners” in Victoria will be our immediate friends and families (groups of up to 5 people can gather at each others’ homes), outdoor activities (groups of up to 10 people), wedding organisers and funeral directors (more people can attend ceremonies)…. oh, and the AFL (training can resume!).

But Premier Andrews has stressed that this is neither an excuse to host dinner parties every night, nor a reason to ignore established protocols and best practice on personal hygiene and social distancing. So no overnight raves or camping trips. And no dining-in at restaurants or cafes, and definitely no pubs, bars or clubs.

For some people, the continued Stage 3 restrictions seem too much to bear, with a few fringe elements (along with the anti-vaxxers and the anti-5Gers) being more vocal and more physical in their views. But they probably fail to see that no-one actually enjoys living under this regime, and nobody would do it if they had a choice or other safe options.

Thankfully, the majority of the population are willing to comply with the restrictions, however uncomfortable or inconvenient, because they realise the consequences of a second wave of infections (especially as we come into winter) would be worse than some temporary limitations on their freedom of movement. There is also a renewed albeit grudging respect for and trust in our political leadership (if not always felt towards individual ministers), and here in Australia we can also consider the political decisions and public advice in light of scientific data and medical evidence.

A large proportion of Covid-19 infections in Australia came via overseas travellers (cruise ships and ski trips), while some of thee first community infections came from gatherings such as weddings and religious services. And then there have been “hubs” within sectors such as aged care, meat processing and airport baggage handling.

There are still questions over plans to re-open schools, and sectors such as aviation, tourism and hospitality have a long way to go before “normal” service resumes. Parts of the retail sector have managed to survive thanks to on-line shopping and e-commerce solutions (supply chain logistics and delivery) but we should expect some businesses will never bounce back. Every employer will probably need to have a “Covid-19 Safe” operating plan before bringing staff back to work in significant numbers, whether as part of their best practices on risk management, or as a prerequisite to satisfy workplace health and safety obligations.

The apparent rush to get professional sport back on the field feels like a misplaced priority – especially given the controversy around NRL and AFL players who apparently lacked the self-discipline to comply with the social-distancing measures; and those players who are refusing the flu vaccine as a condition of rejoining their clubs. On this point, I rather admire the comments by Chelsea manager, Frank Lampard, who expressed his unease at the thought of professional footballers getting priority for Covid-19 testing, ahead of essential and front-line workers, simply to fast-track the resumption of the EPL.

Even with the various safety plans and gradual easing of restrictions, it’s up to each of us individually to be responsible for our own actions, and maintain a personal duty of care to each other so as not to risk spreading the infection, nor risk exposing others as a result of something we do or omit to do.

Next week: The Bitcoin halving – what happened?

 

 

 

 

 

The lighter side of #Rona19

After several weeks of lockdown during #Rona19, and despite the serious challenges that we still face from the Pandemic and its consequences, it’s typical of the human condition and our spirit of resilience that people have managed to find humour and goodwill in the depths of despair.

In no particular order (and without any judgement) here are just some of the distractions and interactions that have been keeping us amused during social isolation, as well as a few of the apparent positive effects:

  • The video conference call bloopers (memo to team: pants on)
  • Clips of dogs vs cats navigating home-made obstacle courses
  • #MeAt20 flashbacks
  • Elderly family members accidentally gatecrashing Houseparty online drinks
  • Some introvert pupils actually enjoying schooling from home
  • Clients and suppliers displaying genuine concern for each others’ welfare in e-mails and on calls (I just hope this empathy endures beyond the Pandemic)
  • People reducing food waste (less shopping, less fussy about use-by dates)
  • Homemade videos and photos recreating scenes from famous movies and artwork 
  • More wildlife in urban areas (I’ve also seen more birds, bugs, bees, butterflies and beetles in my back yard and in nearby parks)
  • Public libraries of iconic images for use as video call backdrops (conference calls will never be dull again…)
  • An apparent drop in traditional crime rates, and fewer typical hospital casualties (people not going out getting drunk, getting into fights or overdosing)
  • Hosting virtual dinner parties (no need to organise a taxi home)
  • Many homes now have a “clearance corner” awaiting charity shops reopening (all that time to sort out cupboards and drawers)
  • A visible reduction in air pollution (as evidenced by before/after photos from various cities)

Next week: Startupbootcamp’s Virtual Demo Day

 

The “new, new normal” post-Covid-19

After the GFC of 2007-8, we were told to get used to the “new normal” – of low/slow/no growth, record-low interest rates, constant tech disruption and market dislocation as economic systems became increasingly decoupled from one another. And just as we had begun to adjust to this new reality, along comes Covid-19 and totally knocks our expectations sideways, backwards and upside down, and with it some negative long-term consequences. Welcome to the “new, new normal”.

Just what the doctor ordered: “Stay home and read a book!”

In the intervening years since the GFC (and don’t those days seem positively nostalgic from our current vantage point?), we have already seen ever lower interest rates, even faster disruption in business models and services, and a gradual dismantling of the trend towards a global economy. The pre-existing geopolitical landscape has either exacerbated this situation, or has been a prime beneficiary of the dismantling of the established structures of pluralistic, secular, non-sectarian, social-democratic and liberal societies.

First, relations between the Superpowers (USA, Russia and China) have not been this bad since the Cold War. Second, nationalism has not been as rife since the 1930s. Third, political leadership has tended toward the lowest common denominator of populist sloganeering. Not to mention the rise of fundamental religious sects, doomsday cults and tribal separatist movements. Let’s agree that even before the current pandemic, our resistance was already low….

Whatever your favourite conspiracy theory on causes and cures for Covid-19, it’s increasingly apparent that populist leaders of both the left and the right will use the pandemic as vindication of their policies – increased xenophobia and tighter border controls, increased centralisation of power and resources, greater surveillance of their citizens, a heightened intolerance of political dissent, a continued distrust of globalisation, and a growing disregard for subject matter experts and data-driven analysis.

The writing’s on the wall? Message seen in East Melbourne

There are obviously some serious topics up for discussion when we get through this pandemic. Quite apart from making the right economic call (“printing money” in the form of Quantitative Easing seems the main option at the moment…), governments and central banks are going to have to come to grips with:

  • Universal Basic Income – even before Covid-19, the UBI was seen as a way to deal with reduced employment due to automation, robotics and AI – the pandemic has accelerated that debate.
  • Nationalisation – bringing essential services and infrastructure back into public ownership would suggest governments would have the resources they need at their disposal in times of crisis – but at the likely cost of economic waste and productivity inefficiencies that were the hallmark of the 1970s.
  • Inflation – as business productivity and industrial output comes back on-line, the costs of goods and services will likely increase sharply, to overcome the pandemic-induced inertia.
  • Credit Squeeze – banks were already raising lending standards under tighter prudential standards, and post-pandemic defaults will make it even harder for businesses to borrow – so whatever the central cash rates, commercial lenders will have to charge higher lending rates to maintain their minimum risk-adjusted regulatory capital and to cover possible bad debts.
  • Retooling Industry – a lot of legacy systems might not come out of the pandemic in good shape. If we have managed to survive for weeks/months on end without using certain services, or by reducing our consumption of some goods, or by finding workarounds to incumbent solutions, then unless those legacy systems and their capacity can be retooled or redeployed, we may get used to living without their products all together.
  • Communications Technology – government policy and commercial settings on internet access, mobile network capacity and general telco infrastructure will need to be reviewed in light of the work from home and remote-working experience.
  • The Surveillance State – I’m not going to buy into the whole “China-virus” narrative, but you can see how China’s deployment of facial recognition and related technology, along with their social credit system, is a tailor-made solution for enforcing individual and collective quarantine orders.

Another policy concern relates to the rate at which governments decide to relax social-distancing and other measures, ahead of either a reliable cure or a vaccine for Covid-19. Go too early, and risk a surge or second wave of infections and deaths; go too late, and economic recovery will be even further away. Plus, as soon as the lock-downs start to end, what’s the likelihood of people over-compensating after weeks and months of self-isolation, and end up going overboard with post-quarantine celebrations and social gatherings?

Next week: The lighter side of #Rona19