Some Emerging Hypotheses on the Economic Opportunities and Challenges of the Post-Pandemic World

Abstract

The next few years can be described as a Valley of Death (both literally in terms of human lives lost, but also metaphorically for the number of organizations that will disappear). Policymakers and private sector leaders (e.g., executives, venture capitalists (VCs), Angel Investors, etc.) must navigate this Valley of Death, even while preparing for the New Normal. Economically strong institutions will become stronger (at least relative to their peers); the weak will be taken over or go bankrupt. So, what will the world look like on the other side of the Valley of Death Recession, when the pandemic has passed? Expect increased industry concentration, with fewer competitors in various markets. Several existing trends (e.g., e-commerce, automation, Telehealth, Work from Home (WfH) arrangements and technology, etc.) are already experiencing accelerated adoption rates. Even after the pandemic passes, we won’t see a return to old consumption patterns in many of these areas. For startups, this will be the worst of times (e.g., getting a team together in a recession and pandemic), and potentially the best of times (e.g., disruption on this scale equals opportunity). This isn’t just a story of accelerating existing trends – also expect some discontinuities (for example, in globalization and air travel). Globalization will slow, and potentially even reverse. Airlines and long-distance travel could take quite a long time to return to 2019 levels. Leisure and Hospitality will be very sluggish across the Valley of Death, but will rebound quickly when the pandemic passes. The ‘decline and/or death of cities’ arguments are overstated and often ignore facts, academic research and common sense, but urban real estate markets will change. Inequality (both racial and socio-economic) will increase, and in the short run, this will be difficult to mitigate. The Valley of Death Recession has dramatically lowered our carbon footprint – hopefully, we’ll retain some of these gains. The role of government in our lives (by the end of this pandemic) will be much larger, and it’s unlikely to shrink quickly to pre-pandemic size. Inflation will remain under control; actually, deflation in some sectors might be the challenge. Finally, keep in mind, this essay isn’t intended to be exhaustive, but I hope to stimulate a serious conversation about what the New Normal will look like.