Post-Pandemic Opportunity: Will We See It?
Many commentators talk about the world we will find after the pandemic quarantine ends. Many focus on the economic consequences, the unemployment and the supply chain issues. To me, to basically focus on the economic or even the economic, social and political issues is to miss the point. Since WWII the U.S. and much of the world has focused on economic well-being at the expense of nature. Some blame self-interest, but to me that is to still miss the point. We need a thoughtful, new plan for how to go forward. However, we should not miss the lesson from the current pandemic. The message is not about public health, government response or even resilience. The point is that we cannot ignore nature, the natural system that makes everything possible. This pandemic, like all the pandemics throughout history and dating back to the Greeks, is a dramatic reminder that we have ignored the most important principle — a species’ first priority is to survive. However, we must remember this lesson is wide-ranging.
While hopefully the U.S. will build up a public health infrastructure to prepare for the next pandemic, sort of like the federal highway building program after WW II, I am afraid we may be distracted from the issue even bigger than the pandemic — the environment. The clock is ticking on the extinction of the human race if we do not address the environmental issues. Pandemics are not likely to bring about the extinction of humans, but environmental degradation could. Therefore, in the post-pandemic period we should surely create a better public health infrastructure, but we cannot do it by delaying programs to address the imminent environmental issues. I worry that vote seeking politicians and the increasingly prevalent dictators will prioritize public health and further delay remedial programs for the environment.
If governments were to simultaneously reprioritize the environment and public health, there are a few points to note. Many experts say that we should look at economic history, such as the Great Depression, to plan for the post-pandemic future. Such an approach implies that the economy is what should drive the decision making and that is a repetition of what got us to the precipice we face today. We need to redefine the economic approach so that the critical needs of the environment and society are met first. If that sounds too idealistic, I would remind the reader of the idealistic approach that spawned both the French and American Revolutions. If we were to reprioritize, there are several observations that might help us to balance environmental remediation, public health resilience and economic livelihood for all of society.
Throughout history pandemics have led to a reorganizing of political power. The Black Death took down the Mongols and Spanish Flu helped to accelerate the decline of the British Empire. In each case, nationalistic rather than regional or international interests tended to appear as paramount in the aftermath. Sea power and shipping lanes became a focus to adjust for the new strategies at the country level. This history suggests that the pandemic will lead to a more nationalistic approach albeit probably with regional cooperation. International organizations like the UN and IDB will lose influence and the world could evolve into vertical spheres of influence (U.S., Canada, LATAM and China, Southeast Asia) or perhaps spheres of common interest such as NAFTA, ASEAN and BREXIT will begin to function better under increasing social pressure. Sea power and shipping lanes will be of importance in how the global supply chain is reorganized and localized. Africa may not be ignored in this realignment, depending on whether the world still needs their natural resources to satisfy consumer demand in East Asia. If Africa were to become the remaining source of pandemics, perhaps the standard of living there would finally be addressed effectively and improved. Such an approach might be led by the U.S. or China, as opposed to a weaker UN, not so much to project power as to foster homeland resilience.
The trend of the last two hundred years for job seekers to move to cities will continue, especially if artificial food rationalizes agriculture for environmental purposes. Increasing trends toward customer experience and personalized services suggest that political power could shift to the cities, the only government agencies that operate in real time (except for the Department of Justice). The United Nations 2050 forecast of 68% urban dwellers may prove conservative. However, such population concentrations will increase the contagion risk during a pandemic. Cities will need to redesign services, including public transport. Perhaps use fleets of unmanned electric vehicles or subcontract the service to Lyft or General Motors. The rich will probably all opt for country homes, as they have done in New York City and Boston during the current pandemic, which may see support for museums, culture and the arts reduced. The efficiency of cities is one important part of the strategy to address the environmental problems, and we should keep that in mind as we redesign cities to better address pandemics.
The cities are home to many of the disadvantaged, whether it be for reasons of discrimination, intellectual or physical challenges or economics. The percentage of disadvantaged in the post pandemic period will increase. Many of the people who tried to survive through the gig economy and micro-entrepreneurship before the pandemic will now face increased competition from the millions of new unemployed that will not see their jobs restored after the pandemic. This situation will exacerbate the current wealth inequality and make this problem worse.
I think the way to address the wealth inequality is for cities to subcontract a higher level of strategic services to the private sector, paid for by local, state and federal tax increases. For example, federal taxes paid in 2017 totaled $1.6 trillion[1] and the top 1% of taxpayers paid 21 percent of the total. If we said that the top 2% were to pay an additional 21 percent, that would raise about $330 billion in additional federal taxes as a start. Half that amount could be paid out for workers in expanded city services and the remaining $165 billion could be earmarked for environmental and public health infrastructure programs … every year. We could call this new tax the “resilience tax”. (Perhaps a special allocation could be made for the physically and intellectually challenged who have increased difficulties during remote working/living.) Deficit spending cannot go on forever, especially after the pandemic spending of $2 trillion in the U.S. alone. We need to recover a portion of the wealth creation from the Computer Age and reinvest it in environmental and public healthcare infrastructure. Laissez faire permitted the wealth accumulation of the Computer Age, but now we need to deal with this industry and its founders in a way that reflects the maturity of their industry. An additionally program could target increased employee stock ownership in the companies where employees work, but that would be a longer-term fix.
The shift in the economy after WWII to hardware and software shifted the traditional wealth creation model from land and labor to information and capital. On any day if you look at the ten most valuable companies in the world there are almost always nine that are digital information companies like Google and Microsoft, financial institutions like Berkshire Hathaway, or some mix of both like Alibaba and Tencent in China. This new wealth creation model exacerbated the situation for the disadvantaged who could not participate for a variety of reasons. This new wealth creation model is about to go on steroids after a temporary delay for pandemic. The power of the digital and financial business models is that they scale at near zero marginal cost. Post pandemic will see Version 2.0. This will be a build out of cloud computing, sensor networks (Internet of Things, IOT) to capture data and improved data processing through better database design, more advanced artificial intelligence algorithms and perhaps commercialized quantum computing. This strategy will enable remote data collection and processing with only the requirement for an Internet connection and maybe Excel type skills. Data will be prized for its predictive value rather than analytical, historical value. This will logically permit many more local data analysts to create value and start new businesses, but many more traditional jobs will be redundant. More and more gig workers will need to embrace this “predictive analytics” at the edge of the network. Perhaps to support such an outlook, we need to adjust the approach to education and convert STEM to STEMC. The “C” stands for computation. Jeanette Wang, then Chair of Computer Science at Carnegie Mellon University, offered this recommendation in 2006 but was largely ignored.
Cyber-physical systems will extend the edge of the information network inside the human body. This will help with public health and healthcare management and make petabyte and exabyte size data sets typical. A dramatic change in computing is always signaled in advance by the introduction of new terms to explain the size of the data sets. Such large data sets require more processing power, advanced technology tools and storage, all of which will significantly increase energy requirements. Such personal data sets also require privacy regulations, but I think privacy will be ignored in favor of new anonymous data collection and storage technologies and public health priorities. A positive outcome from all of this health data is that it will require more advanced technology tools to better process the biological data and such tools will also be applied in other industry such as agriculture, advanced materials and consumer products. As physics propelled the 20th century, so biology and its new tool set will drive the 21st century. Maybe we need STEMBC, with the implied joke that STEM was before “biology and computation” became so crucial … for both social and economic purposes.
Arthur Eddington, the famous physicist, said that the default state of nature is scarcity. In many ways I see the current remote working and social distancing as a return to scarcity. It presents the opportunity to revisit which parts of abundance we need to maintain going forward and which parts we can forego in favor of environmental remediation and better public health. Some possibilities:
· Restructuring real estate is one opportunity. Do we need so many buildings if we work 3- or 4-day weeks, share office space on a 24-hour basis or only staff in the office for the people whose tasks are more efficient f2f. Instead of sending used bicycles to Haiti, we could perhaps also send used office buildings. If universities planned for a lower percentage of on campus classes, perhaps only the experiential classes like chemistry lab or drama need to be on campus. Such an approach might lead to the opportunity to repurpose large amounts of university space. We could return the then extra space to parks or plantations of trees to address CO2. Real estate was a wealth creation model from the 18th-20th century. Real estate needs to be disrupted in the 21st century.
· Cyber-physical systems, telemedicine and digital health will combine to redefine public health and traditional healthcare. Systems biology will accelerate the trend. The Internet will be critical to the delivery and advances in healthcare and medicine and fortification of this infrastructure will be paramount. Urgent care and community oriented healthcare will proliferate if Internet access is made more affordable or free at a minimum level for the disadvantaged.
· Cities will be the battleground in environmental remediation, as we struggle to redefine real estate, the role of city government and the post-pandemic community. In an informed world Elinor Ostrom’s Nobel Prize winning economics would inform our strategy. She offers an experience-based validation for the effectiveness of game theory in what is now political decision making. Ostrom’s balancing of politics and the economy anticipated the need for environmental sustainability to be an equal priority in political/social decision making. The University of Pennsylvania offers a course that combines game theory, data analytics and behavioral economics. Such a course would provide most of the approaches for any city to reform itself, if we could train and retrain political hopefuls in these disciplines.
Now that we have reformed education to introduce computation, transformed the university model and redesigned the cities, simultaneous with a shift in government power to cities, what could be left to consider. Only the 800-pound gorilla. What will the corporations need to do? Corporations will need to redefine themselves to integrate social impact into their strategy. In a recent article, “The Time for Social Innovation is Now — Three Strategic Alternatives”, I outlined three approaches to better corporate citizenship. Corporate social programs need to be an imperative. When the World Economic Forum and the Business Roundtable recently started to call for corporate involvement in social impact, it is partly as a strategy to preserve capitalism and partly a recognition that corporations need to step up given the imminent deadlines for wealth inequality and environmental crisis. We as a people have come to expect government to solve problems. Recent events would suggest government gets a C-, at best.
Black Swan events, such as the pandemic and the 2007 financial crisis will only become more common as interconnectedness expands further to the edge. The only organizations that have the resources, the talent and the experience managing urgency day-to-day are the corporations and particularly the multinationals. If we look at investment in research since 2000, corporate expenditures ($782 billion 2018[2]) have increased to 10X government research funding. One could argue this was only self-interest, but one could also argue that such an approach was more efficient for the corporations. Much of what will shape the future, we know will come from research in technology which will be paid for by corporations. If we can use the corporations and their skills to focus on a more humanistic, environmentally sound approach to the future, perhaps we can learn to live richer lives with less need for natural resources. More corporate university research partnerships might speed the transition. The big secret is that Harvard Business School research in 2015[3] shows that companies with greater focus on social impact also produce a better return on investment. Hint: Social impact motivates employees to be more productive in all areas of their work.
The three approaches that corporations can implement for social impact, as described in my article above, are:
1. Corporate Social Responsibility — $$$ and volunteer employee hours to support community programs and NGOs. Picking a focus on one problem, such as one of the United Nations 17 Sustainable Development Goals, allows the company to build knowledge and expertise in the social problem which could benefit strategy and execution in approaches 2 and 3 below.
2. Business Model Innovation — the process of how the company creates value, captures value and manages customer experience. In each step in this process look at ways to improve environmental outcomes or increase economic or social benefits to employees, counterparties and/or the disadvantaged. For example, Etsy’s deliveries are CO2 neutral. Some corporations pay their suppliers in Africa faster as a means to provide them working capital. Business model innovation takes commitment more than creativity.
3. Social entrepreneurship — entrepreneurship directed at social problems rather than market problems. This is the biggest lever the corporation can use for social impact because it enables them to directly solve the problem by delivering the customer solution. It also makes the corporation more viable because it creates a new line of business typically with a new customer base. It is harder for a corporation to do social entrepreneurship because understanding the disadvantaged customer is new to them usually. However, creating a new business at scale generates appropriate returns and the returns are both economic and social in social entrepreneurship.
While 1. above is the most common and easiest, it should only be a temporary strategy to give a company time to implement 2. and 3. The second approach is the most quickly scalable way to generate significant social impact. Widespread adoption of the third approach — social entrepreneurship — would simply change the world as we know it. Social impact is within reach, we just need the corporations to put aside the simplicity of shareholder returns in favor of a balanced approach that also recognizes the priority of environmental and social needs.
Please share this article with your friends who work in big corporations. We need their help urgently.
These are my personal opinions and do not reflect the views of any organization with whom I am affiliated.
[1] https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/
[2] strategy&, a unit of PWC
