SARS-CoV-2 (SARS-2), the virus causing Covid-19, has spread to pandemic levels. This health crisis will likely become the defining moment of the third decade of the 21st century, if not that of an entire generation.
It has dramatically altered the behaviour of millions of people in the short span of just a few weeks and will continue to shape politics, society and the economy for all of the foreseeable future.
It may be too early to vividly speculate about exactly how society will change, but the experiences of 2001 and 2008 show us that is possible to predict the general nature of changes relatively quickly, although their long-term impact is always initially overstated.
As much as SARS-2 will begin a new era, it will also seal the fate of the waning War on Terror and threaten to rapidly deflate the asset bubble.
The below observations are primarily for your (and mine) entertainment, as I can’t help but write these down in the hope I will be wrong about much of it. They are purposefully exaggerated for clarity.
- Anyone travelling in this summer will need a health certificate upon embarking and undergo a mandatory PCR test and possible quarantine upon arrival. Many of these restrictions will be in place for a long time, and some of them will remain forever. As we segregated our arrival areas in airports by port of origin post 9/11, we will continue to be careful not to mix passengers from “green zones” with those from “others.”
- Global travel has come to a halt. On a normal day in March, Hong Kong’s flagship carrier Cathay Pacific would transport over 100,000 passengers. Now, this number is as low as 583. There are only four long-distance destinations left operating, each only served twice a week. International flights are down 60–90 per cent around the world. Travel volume will not pick up very quickly even if SARS-2 were to miraculously disappear suddenly. Travel restrictions won’t as easily be removed as they were erected, and the traumatic experiences of stranded tourists, quarantined travellers and families torn apart will deter people from flying for a long time to come.
- Airlines, once bankrupt, won’t be able to as easily grow back to their old scale. Budget airlines may not become profitable again for years as capacity utilisation remains low. Tickets will become a lot more expensive.
- Businesses will accustom quickly to virtual conferencing and realise how much of their travel is non-essential. With travel costs going up and budgets squeezed, offices might find themselves investing more into in-house conferencing studios, and less on travel.
- If your 2020 international conference is not cancelled yet, it will be. Events until mid 2021 are on uncertain footing. Even if some nations get SARS-2 under control, they will be hesitant to resume large-scale events, especially if that involves foreigners.
- Nomad culture is at its end. Travel will become expensive, and casually hopping across borders unacceptable. Especially in light of the visible outbreaks in Europe and North America, many nations will not be as accepting of even wealthy tourists blurring the line between work and travel. There might be “startup visas” that will replace these arrangements, targeted at young entrepreneurs and freelancers. They will be expensive, inflexible and include health checks.
Living and working
- Living and working will be harder to keep separate. The home office will become a better equipped and central part of people’s homes. Some people will go as far as working out of their personal soundproof video conferencing studio. Corporations unable to adapt to a culture of efficient remote work will fail.
- For many people in Hong Kong, the conveniences of densely populated areas seemed to ruff the impersonal suburban lifestyle of the minivan commute. With remote work quickly becoming the norm and crowds less acceptable, will people favour larger rural homes over urban apartments abroad? On the other hand, demand for better healthcare, internet access and home delivery might continue to work to the advantage of Hong Kong.
- As people largely stayed at home in February and March, they may have realised that there is something missing in their apartment. Others finally took the time to undergo their home improvement project. In the future, people will much more carefully furnish their living quarters and spend more money on it.
- From Wuhan to Bergamo people have been working hard to improve their cooking skills. Many of them are living more healthily, eat better, live more fulfilled lives and will definitely make sure they have access to a larger and better kitchen next time they move. That’s great news for businesses that make kitchen supplies and move fresh produce around, and bad news for the fast food and processed food industries. Local farming way make a comeback in rural Hong Kong, and industrial buildings purposefully built for vertical farming finally receive their approval from the Lands Department.
We will invest more in health care and health capacity and rethink much of our hospital and general practitioner infrastructure, like how Hong Kong already began post 2003. Special fever clinics will cater to those with high body temperature. Patients will be screened remotely as much as possible, carefully isolated from others.
- We will aim to eradicate not only SARS-2, but also any other infectious diseases. It has been cynically noted many times that “the flu” kills up to half a million people per year as if this was somehow acceptable. We will massively reduce the spread of influenza and no longer tolerate this virus in developed societies.
- Your bathroom will become a clinic. You’ll find basic medical supplies like thermometers, sphygmomanometers (blood pressure) and simple diagnostic tools for urine, stool, blood and saliva in every home. Together with data from your smartwatch, we’ll be able to detect health problems much earlier.
- Medical surveillance will become a thing. You will see thermographic cameras at the airport, office and even restaurants. Hong Kong authorities may decide to take regular samples of sewage and test it for common or dangerous illnesses. Any abnormality may prompt a visit from your local (armed) CHP unit.
- Quarantine will become more streamlined and institutionalised. Quarantine “hotels” at AsiaWorld-Expo and Shenzhen Bay will make every international trip a game of roulette. But unlike the spontaneously converted housing and hotel complexes of 2020, they will be safe and properly equipped.
- Your passport will contain a health page, similar to the yellow World Health Organization passport that is still common when travelling around Africa. This page will include your permanent health issues, vaccines and immunities. Your HKID may also come with a feature that allows an authority to read and update any medical prescriptions and conditions known. No-fly lists are expanded to those without essential vaccination.
- We will more carefully provide safe places for the elderly and weak. We will design and renovate elderly homes to be more resistant to infectious diseases. This will be difficult to weigh against the quality of life concerns for these people.
Entertainment and education
- We will not see mass concerts, festivals, sports events or conventions for a while. Clockenflap, was cancelled in 2019 due to political unrest, and it will be cancelled in 2020 due to the still uncontained infectious SARS-2 virus. International festivals might never re-emerge in their pre-Covid form.
- Sports and competitions will still be popular, but they will have to reinvent their business models to function without large physical audiences. Team sports will be hit the hardest, and online gaming as well as extreme sports become more popular than ever. Events like the Olympics will continue online, but there will be far fewer such events.
- Without classes, a university is just a really expensive video tutorial. People will continue to spend money on education, especially for personal tutoring. Elite universities will continue to be highly sought brands, but as simple online brands they will need to compete internationally and much harder and dramatically lower their prices.
- Hollywood has been working hard at making itself irrelevant over the past years, and movies released in 2020 will go straight to streaming sites. The cinema is dead, and with it dies a corrupt industry that has lost its integrity and creative talent by turning its products into corporate advertisements and political propaganda. Streaming platforms will have to more openly compete over our attention and more easily reach a global audience.
- High-quality online entertainment such as music, video, games and education can be provided at a very low cost and acquired at the margin at a price of zero. This will have as massive consequences on the economy as the virus itself: The Kinky Labor Supply Curve.
- Museums, their artefacts and cultural relics will be finally digitised and made available online. The digitisation of libraries, newspapers and government records will also be greatly accelerated.
- Masks work, and they are here to stay. They’ll be perceived as less threatening, more fashionable and in many instances, it will be unacceptable not to wear one.
- Ties and dresses are sold with accompanying masks, there will be sports masks, smart casual masks, and in addition to the hazmat suit: “Hazmat black tie.”
- Masks will come included in corporate and government uniforms such as police, aircraft crew, chefs or supermarkets. Wherever you now see an umbrella dryer or soap dispenser, you’ll eventually see hand sanitiser and a mask dispenser.
- How many rituals are here to stay is most difficult to predict. SARS-1 did introduce new rituals to Hong Kong, such as the communal chopstick and strengthening others, such as washing dishes in tea. Will people still shake hands, hug and kiss each other on the cheek? Will they take their mask off in the office? Some restaurants have already begun installing sinks at their entrances to encourage patrons to wash their hands, while others put up plexiglass separators at tables.
- Let’s make sure the “elbow bump” never becomes a thing.
Money, investment and the economy
- Significant inflation will be inevitable. While the 2008 bailouts were mainly credit expansion, an accounting trick that trickled primarily into ever-growing assets, they were tiny in comparison to what is expected for 2020. Those receiving cheap loans in the past decade put that money mainly into stock and real estate, but now people will put it into food, rent, medical supplies, maintenance. We are producing less than we did before, but there is more money going around bidding for these products. Watch the bitcoin and gold markets.
- Hong Kong has little foreign debt. Instead, it has massive assets in the form of US dollar-denominated treasury notes. These assets are at risk of being inflated away, and imported inflation will question the meaning of the dollar peg as never before.
- Capital intensive industries like tourism and entertainment might not recover. Their assets will have to be written off. This also applies to millions of restaurants, bars, conference venues, theme parks, club hotels and cruise ships. With their high leverage, this will be painful for a long while.
- How will SARS-2 impact the market for office real estate? As companies permanently plan for lockdowns and get accustomed to remote work, they might only maintain small core offices, used primarily for video conferencing. Co-working spaces might be able to survive catering to the “rent-a-studio” market, but how large will this market be if people cannot travel and prefer to arrange for their own infrastructure at home?
- SARS-2 was the warning shot for globalisation. Tight just-in-time supply chains have proven to be highly vulnerable in a time of curfews and closed borders. We already saw some turbulence as markets adjusted to unpredictable “trade wars,” but what’s about to come will be far more dramatic. Less economical integration means massive warehouses, vertical integration, longer turnarounds and most importantly, higher prices. We will see many industries being “on-shored,” starting with medical supplies, medical equipment, food, all the way to electronic and mechanical parts.
- Developing countries will be absolutely crushed by these developments, to the point that some will see hunger, war and a drop in life expectancy. The lack of tourists means less income for otherwise unqualified citizens, the reduction in economical integration will lead to a shutdown in many factories, while an increase in food prices hits people the most.
Many of these changes will happen quickly, others slowly, and some may not happen at all. Some changes are already underway and will merely be accelerated. Many of the policies put in place so far will never be eased.
Some places, like Hong Kong or Singapore, will work hard to eradicate the virus completely from their territory, and they will put harsh rules in place to keep it that way. Others, like Europe or the US will prefer to keep the virus rolling through their societies just slowly enough for the medical system to be able to cope with it. Either way, all you see is more and more permanent.
The music has stopped playing, and we’re all back to our seats.