Thoughts about The New Normal

Here, in no particular order, are some thoughts about what will happen in the wider world.

Inflation

Any business model that relies on packing people into a confined space will either adapt to packing in fewer people, or the business will not survive. This means that any and all businesses relying on human contact for sales will, in order to survive, have to raise prices significantly. This will ripple through the economy in nearly all countries. Food supplies, eating out and other social interaction events, travel and vacations will all substantially increase in price.

Doomed Business Sectors

1. Commercial real estate

Apart from when I am on the road doing consulting with clients, I work from home, and I have done so since 2007. My wife’s employer has moved all of their employees to home working in Dallas since Covid-19 showed up. That is 500 people no longer commuting to work in Farmers Branch, most of whom will not need office space in the future. This is happening all over the business world. Many service industries that do not require human contact for the delivery of services do not need to have everybody working in the same physical space. The idea of co-locating people is a historical relic from before telecommunications. 

I expect massive drops in the value of commercial real estate over the next 2-5 years, with associated bankruptcies and the calling in of bulldozers to eliminate old buildings. Many business districts will shrink in size.

 2. Large commercial jet manufacturers

Boeing and Airbus, in their current form, are doomed. They will need to adapt current and future designs to include better air quality management (including micro-particle scrubbing) and re-configure seating to allow for physical separation. Right now, any pending orders for new jets are highly likely to be cancelled. There are no airlines with the money to buy new planes. It would not surprise me if they are already looking at Ultra-Wide-Body design changes. The move in recent decades has been away from wide-bodies (747, A380) back to narrower-body planes. Airlines (those that survive) may want wider planes so that they can impose wider separation between passengers. It would not surprise me, for example, to see a radically reconfigured A380 with only 200-250 seats total.

3. Cruise Line companies (except the eco-nichers)

Despite the trumpeting of cruise lines about late Summer bookings, their business model has just been holed below the waterline. A lot of smarter people are going to regard the idea of sharing a virus incubator with 3500 other people as…not smart. Your $10k cruise to the Galapagos Islands on a 50-cabin luxury liner will still be available, but the $599 dash down to Cancun for a week on Leviathan Of The Seas? Not likely to be available any more. 

I expect many current cruise ships to be laid up by the beginning of 2021, and scrapped by 2025. The cruise lines, like the airlines, will need to retrofit their vessels to implement the concept of social distancing. That will, at the very least, reduce the number of passengers, and will increase cruise costs substantially.

4. Sports bars

Many city restaurants and conventional bars have been transformed into sports bars, because people tend to drink more standing up, and alcohol sales are more profitable compared to food sales. Those venues are going to rapidly disappear. They can clearly be seen as proximity incubators.

5. Major sports and entertainment stadiums (especially NFL)

Any large-capacity venue of this type has a major challenge. The worst impacted will be the NFL, where the economic case for a permanent stadium for a team guaranteed less than 10 home games a year has always been tenuous. The leap-frogging of stadiums (bigger and better) has always been driven by owner vanity rather than proven practical need. Baseball ballparks do at least have a significant number of home games a season. The NFL…nope. Most of the venues have other facilities to try and make them economic. Those other facilities such as conferencing and concerts are going to be doomed (see 1 above).

Concert venues are most likely doomed. Those arena rock stars are going to have to find other sources of income in the next 1-2 years. Major venue owners have to pray that the pandemic fizzles out before they have to close, unless they can figure out how to go drive-through (see below). 

Impacted Business Sectors

  1. Restaurants 

Any venue relying for its business model on packing people in close proximity for lenghty periods of time either adapts or will not survive. A lot of smaller restaurants are going to disappear. The economics of restaurants in most countries have always been marginal. 

2. Tourism

The move to a two-tier travel world (see below) is going to reduce the size of the tourist sector in many countries. 

Boomed Business Sectors

  1. Aircraft scrapping and recycling

Many airlines are going out of business, and we can expect major reductions in routes, especially internationally. Companies that recycle old airliners are going to enjoy a boom. 

2.  Drive-in cinemas

Suddenly, the idea of driving into a location in your car and watching a movie sealed in your car or, at the very least, physically distanced from others, looks rather smart. 

3. Home delivery services

For people who can afford it, having items delivered instead of engaging in superfluous human contact will look very attractive.

4. Immunization registries

Any IT corporation selling an Immunization registry product is going to…become very busy. I expect immunization records to become an essential document in the pandemic era. We will all need an immunization record, and if we do not have one, our movements will be restricted. This may apply inside and outside of the USA.

Two tier global travel

There is evidence that countries who regard themselves as having successfully managed Covid-19 contagion are already forming alliances with other countries. This is rapidly going to create a two-tier travel world. The Tier 1 countries will allow residents from other Tier 1 countries to enter with normal travel documents. Any traveler from a Tier 2 country who arrives will either be rejected and told to go elsewhere, or will be admitted only under strict quarantine rules (usually a 14 day lockdown).  The same conditions will apply in reverse. Travelers from Tier 1 to Tier 2 countries will be admitted, but when they return to their country of origin, they will probably be forced into quarantine, which means that unless they work from home, foreign travel will become logistically impossible for many.

(NOTE: This will eliminate a lot of tourism). 

Right now, the USA and the UK would be Tier 2 countries. The majority of European countries, with the exception of Sweden, are likely to be Tier 1. Most Eastern countries are comfortably Tier 1. 

Note that the Tier classifications of countries could change. Countries that relax lockdown too soon and too much may suddenly find themselves hit by a second wave of virus contagion, and if the virus mutates sufficiently to eliminate all prior human immunity, the entire contagion cycle could begin all over again. 

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