Coronavirus-Created Paradigm Shifts: How We Live, Work, Invest Is All Changing

Shah Gilani|April 23, 2020

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Editor’s Note: The novel coronavirus is changing everything, and nobody said it better than my good friend and colleague, Shah Gilani. Shah and I have known each other for more than 20 years and I think you’re going to find his thinking quite compelling, especially since it effects darn near everything… not just the way you invest, but the very way you live. For better or for worse… -KFG

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The novel coronavirus isn’t new anymore, it’s everywhere and disrupting how we live, work, and invest.

Major paradigm shifts are already underway. Here’s how life as we know it is changing.

Reaction to COVID-19’s origin and spread

The origin of the novel coronavirus is officially unknown. But that hasn’t stopped speculation about whether the virus manifested itself naturally, perhaps originating in bats, getting passed to an intermediate animal host, and morphing or becoming zoonotic, and able to infect humans, or whether it is a manmade virus.

If its origin is zoonotic, the world will still want to know where and how it happened and how to prevent naturally occurring future virus mutations.

If its origin is manmade, whether it was being engineered as a SARS vaccine, or an HIV-attached bioweapon, matters.

When the truth is discovered, or the most plausible scenario gets mapped out, countries are going to react. The nature of global relations will change.

If the virus is determined to be an engineered bioweapon, we’ll see the rise of nationalism, of xenophobia, and possibly saber-rattling.

Even if the virus is a bad vaccine that accidentally escaped a biolab, the fact that its origin and lethality were covered-up will change how countries interact and trade with each other.

Governments and companies are going to reassess supply chains and access to essential and strategic goods and services. Global production, even in countries that have a comparative advantage in labor costs and raw materials, will be reconsidered in favor of more “local” production.

That’s going to change where capital will be allocated and where and what to invest in.

What shutdowns have changed

Cities, states, and countries shutting down have changed everyone’s experience and appreciation of what’s necessary and what’s not really necessary.

What’s necessary is access to goods and services and the ability to learn, live, work, and earn remotely.

In any shutdown, that means Internet access, connectivity speed, cloud services, security software, remote tools, including video and interactive services, contract execution facilities, and maybe everything blockchain.

Digital education and entertainment are necessary.

What’s not so necessary any more are offices, huge investments in commercial real estate, extravagant college campuses, and bricks and mortar retail spaces.

Determining what’s necessary and what’s not so necessary is upending lives, businesses, old investment themes and generating new ones.

The downfall of bricks and mortar retailing is being accelerated by the agglomeration of e-commerce.

Agglomeration economics will result in e-Com oligopolies.

The world’s already on the way there with behemoths like Amazon leading the way.

The digital rich are going to get richer and new single-purpose and multi-function digital vertical silos will rise-up to join the likes of Google, Facebook, Apple, Netflix, and Microsoft.

Commercial real estate will be rethought and reinvented.

Companies have already discovered they don’t and won’t need offices for the bulk of their white-collar workers. Co-working space, based on short-term leases or daily rentals, will become more popular.

Office buildings will have to be converted into residential buildings.

That shift will start a year after the shutdown ends, or as soon as commercial leases allow.

Small, permanent retail stores will mostly disappear in malls. In shopping centers that survive, seasonal retailers and pop-ups will replace long-term tenants, who, if they stay will have to guarantee or accept profit-sharing leases.

Single-use buildings will have to become multi-purpose spaces, making way for convergence hybridization models that offer retail goods and services, dining, warehousing and serve as distribution and delivery hubs.

Employment and unemployment shifts

In the aftermath of the virus, as companies adjust their business models and modernize their service and production lines there will be fewer good-paying jobs and fewer jobs in general especially in hospitality, travel, and leisure segments of the economy.

And younger workers will battle it out with older workers for those jobs.

Automation of the workforce is already reducing the number of entry-level, labor-intensive, repetitive, and skill-required jobs. As company revenues decline from being shut down and the ensuing recession, at the same time competition and agglomeration increase, labor savings are going to be more important.

As sales become more digital and workers become more “expensive” in terms of increasing healthcare costs, unemployment benefit costs, paid sick, childcare, and vacation leave costs, as those costs create more “liabilities,” companies will accelerate worker replacement with automation.

Young people entering the workforce and looking for different jobs and older workers, including the “grey tsunami” of retiring workers who aren’t going to be able to retire, are increasingly going to be competing for the diminishing pool of low-level and entry level jobs.

Seismic shift.

As layoffs increase now and seismic virus-driven shifts throughout the economy disrupt businesses, whole industries and sectors, the number of the under-employed and unemployed Americans will increase.

Unemployment benefits are already changing to accommodate millions of the newly unemployed. Some changes will likely have to become permanent.

The U.S. may be on its way to providing some form of “basic income,” not by choice, by necessity.

While the idea of basic income, or a Green New Deal, or free college, seemed impossible, if not ridiculous, only a few months ago, it’s all possible now.

If the Federal Reserve can finance trillions of dollars of rescue money to support private enterprise businesses, including big banks and airlines that buy back their shares to enrich management and shareholders, albeit temporarily it turns out, surely they can finance social services and giveaways that less than two months ago were crazy political promises.

Paradigm shifts wrought by the novel coronavirus will change how we live, work, and invest, forever.

For investors with capital to wager on the future, the paradigm shifts before us present extraordinary money-making opportunities.

Sincerely,

Shah Gilani