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After the Storm

Tim Johns | 15th April 2020

I’ve never experienced a hurricane.  A real hurricane.  But I know people who have, including people who live on a main hurricane route.  For them, every year there is a hurricane season. And there’s the “once in ten years” hurricane. And then there’s the “once in 50 years” hurricane.  Forecasting nowadays is pretty accurate so they know that the storms are on their way.  They lock down the house, battening down the hatches, putting up storm shutters, and retreat to safety in a secure basement where there are ample supplies and stand-alone generators.  And there they stay until the storm has passed.  When it finally moves on they emerge from their bunker to survey the scene.  The damage will often be extensive.  Chainsaws will deal with fallen trees but there will be much that has been broken beyond repair.  But things will be replaced and things will return to normal.

So, what about our Covid-19 storm?  What will it look like après le déluge?  Some may feel that it is too early to start thinking about the future when we’re still in the midst of the crisis.  Others will say that without a clear sense of direction it is impossible to know whether we are heading on the right path.  I have always maintained that it would be great to be able to press pause: to put life on hold for a moment whilst we take a look at where we’ve ended up; to get our bearings and reflect on whether we are happy with where we are and where we’re going.  Are we going to reappraise, reinvent, or remake? 

There are, I think, four main ways to think about what happens next. There are the Iconoclasts, who see this as an opportunity to move fast and break things. These people want to seize the opportunity to start afresh. 

Then there are the planners, who with calm and considered system’s thinking, want to co-create a more inclusive future. They want the chance to create a sustainable Utopia, probably centred around Davos.

Then there are the followers of Belloc’s poem Jim with its famous line: “Always keep a hold of nurse / for fear of finding something worse”.   They’re the incrementalists, who want as few changes as possible.

And finally, there are the followers of Sir Arthur Streeb-Greebling, owner of the Frog & Peach – the catastrophic failure of a restaurant with a limited menu (frog and peach) situated in a bog in the middle of Dartmoor.  Poised to open a new restaurant, he was asked whether he felt he’d learnt from his mistakes. “I think I have, yes” he replied “and I think that I can probably repeat them almost perfectly”.

The world of work was already cracking at the seams.  The contract between wealth creation and society is under strain. Add in healthy doses of AI, automation, demographics, disruptive technology, political volatility, and climate change and the picture looks decidedly uncertain. And then Covid-19 came along, bringing recessions, bankruptcies and economic turmoil. Surely too much has changed for things to go back to exactly as they were? Businesses will have changed, people will have changed, governments will have changed.

Churchill won the war. He thought that all he had to do was turn up for the 1945 General Election.  He had the respect, gratitude and admiration of a grateful Nation.  He lost.  He didn’t realise that the War had changed people.  It was time for a new normal.

I do think that so much will have happened that many people want to return to a new version of normal.  And so here are some thoughts for society, government and business of areas that might be ripe for a rethink. It’s far from comprehensive, and not everything is either true or realistic but perhaps many do reflect the sorts of things that will be up in the air.

Governments may have different priorities

  • More directive
  • More interventionist
  • Less trusting of big business and special interest groups
  • More big projects – Les Grands Projet. Marshall Plans. Bretton Woods
  • May effectively nationalise key businesses – infrastructure, travel, utilities, media
  • Rebalance the economy away from services and more support for manufacturing
  • More devolution
  • More nationalistic
  • More protectionist – Britain/America/France First
  • Further fragmentation of political parties

Governments may intervene more in the capital markets

  • Limit foreign investment/takeovers
  • Stricter control of hedge funds (short sellers)
  • Rules on dividend cover and share buybacks
  • Rules on supply chains
  • Tax may need to be reformed – NI (like pensions, are a Ponzi scheme)
  • If jobs are scarce, why have income tax that mainly taxes jobs
  • Tax land/ capital rather than income
  • Change business tax regime

Financial Markets may have to find other ways to measure value

  • EBITDA not EPS
  • Govt strategic investments in certain industries/sectors may see reductions in liquidity
  • More realistic valuations – Ocado is home food delivery middleman not a tech company; Uber is ride hailing app; WeWork is a glorified letting agent
  • Users are not the same as underlying profitable users/customers
  • Clicks are not eyeballs are not readers are not interactors

Society may want different things

  • Rebalance reward/tax in favour of key workers
  • Less tolerance of executive pay
  • Society is only as strong as its weakest members
  • The economy serves society not the other way around

Businesses will have to change

  • Greater role for worker representation
  • Even good profitable, well-managed, innovative businesses will go under.  Fundamental difference between turnover, profit, and cash
  • Questions over “efficient” business models
  • Share buy backs will either be outlawed or become socially unacceptable; ditto sale and leaseback
  • Specialisation less fashionable; maybe a move towards conglomerates who can spread risk
  • Less outsourcing
  • Pressure to shorten supply chains (see: Macron)
  • Less Just in Time, more Just in Case
  • Reduction in global travel, conferences
  • Rethink on role of offices
  • Rethink on effectiveness of open plan
  • Work smarter – fewer hours, less travel, more technology
  • Rethink role of, and primacy of, shareholders
  • Greater role for unions/worker representation
  • End of low cost procurement to best value

It’s a long list and it’s far from comprehensive.  I certainly don’t know the answers let alone the real questions.  But what businesses and society need now are people who can take the long view and the short view; who can learn from the past as well as look to the future; and who can bring the outside in as well as the inside out.

Rebuilding, reappraising, reinventing…

It’s all up to us.

“If we want things to stay as they are, things will have to change”  – Giuseppe di Lampedusa The Leopard

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After the Storm
Tim Johns | 15 April 2020

I’ve never experienced a hurricane.  A real hurricane.  But I know people who have, including people who live on a main hurricane route.  For them, every year there is a hurricane season. And there’s the “once in ten years” hurricane. And then there’s the “once in 50 years” hurricane.  Forecasting nowadays is pretty accurate so […]

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