Journalism is a lagging indicator. With the exception perhaps of the feeds belonging to Balaji Srinivasan (@balajis), Ben Hunt (@epsilontheory), and Jon Stokes (@jonst0kes), Twitter is not much better. Internet macro takes on COVID that appear, at first brush, to be insightful and quantitative are usually also easily debunked. On Twitter, I have seen COVID described as an impossibly unlikely event, a seven-sigma or even 12-sigma occurrence.
Preston Byrne, a CoinDesk columnist, is a partner in Anderson Kill’s Technology, Media and Distributed Systems Group. He advises software, internet and fintech companies. His biweekly column, “Not Legal Advice,” is a roundup of pertinent legal topics in the crypto space. It is most definitely not legal advice.
Everyone has a bad take about what the world is going to look like after COVID-19. “Coronavirus is making the future happen faster,” or “It’s not changing the future, it’s accelerating it!” is one common refrain.
What the hell does that even mean? In most cases, it means the writer-flack usually points to some technology that already exists but nobody uses because current implementations mostly suck (videoconferencing, 3D printing, or VR) and are only regarded as mainstream in dissident tech applications, e.g. firearms manufacturing.
“Will the Coronavirus kill globalization?”
is another seemingly insightful-yet-not-really observation. This literally asked
by Foreign Policy magazine – not when Donald Trump was elected, or when Salvini or Orban or Boris Johnson were elected, or when the U.S. shut its borders to China, or even when the U.S. shut its doors to Europe, but rather this week
, under circumstances where global trade has ground to a halt. Any country capable of doing so has sealed its borders, and both Democrats and Republicans are openly discuss re-on-shoring supply lines.
Translating from math-ese into English, a 12-sigma event would be the sort of thing we might expect to see twice every 10,000 years. But pandemics like COVID-19 are far more common on far shorter timescales: major plagues have swept the world at least 20 times in the last 2,000 years, and at least three global influenzas, AIDS, polio, Ebola and now COVID-19 have each presented global threats in merely the last 102 years.
Resiliency over efficiency
So if we’re not going to wake up in six months and find ourselves in either “Mad Max 2: The Road Warrior,” revisiting the 1881-1914 New Imperialism of hyper-nationalistic great power conflict, or an episode of “The Jetsons,” what should we expect the world to look like in a few weeks when the first wave of COVID recedes?
Probably, we will return to a world much like we left, except businesses will no longer be run with the assumption that raw efficiency should always take precedence over resiliency.
This is not the way most people, and nearly all institutionalized corporate executives, are currently trained to think. I recall a friend who worked at a bank in Canary Wharf, in London, telling me several years ago his bank “did not plan for any contingency that the British Army and a couple of tanks showing up at the front door couldn’t fix.” By which he meant the bank’s official policy considered real-world business interruption events which the British Army could not handle – including, presumably, a global pandemic which shut down the entirety of the United Kingdom – to be so unlikely as to be not worth preparing for.
Everyone has a bad take about what the world is going to look like after COVID-19.
The most interesting business thinking today is likely not to be found in think-pieces or industry panels (if conferences ever return, that is), but rather behind closed doors among the members of boards of major corporations, law firms, importers, and others trying to dissect what has happened to their businesses in the last 30 days, and how to best position themselves to prevent this from happening again.
I’m not privy to those discussions – I am too young and too beautiful to sit on such committees. But having run three of my own businesses I can guess what their conclusions might be. I am guessing (a) strategic cash reserves and (b) wider geographic distribution of staff will be the more important issues.
First, firms will be looking to increase their cash reserves, substantially. This includes companies like law firms which historically distribute most of their profits and don’t sit on cash for very long.
For most small and medium-sized companies, the idea of building a nest egg is an unfamiliar one. For the better part of the last 10 years the strategy has been to pour profits into further growth; demand shocks were nowhere to be seen, and there would always be another customer, or failing that another venture raise, another something around the corner to tide you over, if only you pitched it hard enough, no matter how insane your business model might be. See: WeWork.
I prefer caution. When I ran a small law firm of my own, I kept my burn rate very low by, for example, setting up shop in Connecticut rather than New York. I always aimed to have sufficient opex in the bank, so I could survive in the (extremely unlikely) event the phone stopped ringing for a few months. Fortunately, that never happened, but I would have been ready for it if it had. After COVID-19, rational business leaders will understand that lengthy cashflow interruptions can sometimes occur.
American companies never expected they would require a federal-government-degree-of-planning to manage their own day-to-day affairs.
Second, although work from home will increase in frequency, it is horrible from both a team communication and business development standpoint. I hate it. I expect businesses to prioritize the establishment of self-sufficient satellite offices with very small teams in small, geographically distant exurban communities.
If we need a precedent for this, we should look to the government which has, for at least 70 years, had sweeping contingency plans, chiefly to survive a nuclear war. All federal agencies develop and maintain comprehensive continuity of operations, or COOP: plans to relocate their agencies outside of Washington, D.C. and continue working remotely in the event of a major disaster.
COVID-19 was one such disaster. In a little under a week starting on March 19 and ending on March 26, the lights winked out everywhere between Boston and Washington, D.C., a megalopolis 400 miles where much of America’s commerce is conducted. Millions of jobs were lost. Based on the level of corporate paralysis that has gripped much of the United States during COVID-19, we may safely infer that American companies never expected they would require a federal-government-degree-of-planning to manage their own day-to-day affairs.
What I’ve personally taken away from this disaster is that even geographic spread between cities is a unique form of exposure to cities. There are meaningful differences between the experience of my friends who are stuck in New York and those of us who are “stuck” in more rural areas. Rural zones continue to enjoy greater freedom of movement and action, and less oversight from, for example, overzealous urban police than the people living in built up metropolises. The lower density often, but not always, can result in lower amounts of disease transmission.
Between these two measures – maintaining larger liquid cash reserves and promoting the wide dispersal of small teams capable of fully independent operation – companies of all sizes, large and small, will seek to address pandemic risk. Clever emergency planners will recognize that the risk of a statewide shutdown is not the only risk they face. Pandemic prepping will also mean preparedness for currency devaluations, bank failures, government property seizures, financial censorship, and other threats that lurk in the background.
There will be myriad opportunities to develop business in this new world, including for Bitcoin, blockchain and cryptocurrency companies that can assist businesses in building robust, automated, cryptographically secure financial architectures. I expect that businesses selling credible software-based resilience will be profitable indeed.