Why predictions for a post-COVID world should not be trusted, and what history actually says about our future
Walid ElAsmar | Not every business has suffered through the COVID crisis. And I’m not referring to the despicable merchants that gouged the prices of essential medical supplies. No, I mean honest businesses across the economy that experienced a surge in sales because the crisis made their offerings more needed or more relevant.
In that group, you’ll find of course champions of the remote-service economy, like Netflix, Zoom, and Peloton, as well as makers of hygiene products like Lysol and Clorox. That pattern is plain and simple, almost mechanical in its logic: people are looking to protect themselves from the virus, all the while embracing the most effective substitutes for their former habits. We are simply adjusting to the practical constraints of social distancing.
Alongside, consumption trends driven by our emotional experience of the crisis have emerged. The most conspicuous shifts might be happening in our eating habits. Classic standby foods, like frozen pizza and canned soup, have made a spectacular comeback onto our dining tables. The American Frozen Food Institute (AFFI) recently estimated that frozen food sales have so far grown by about a third in comparison to last year. Conversely, our two-decades-long romance with fresh produce, filled with exotic discoveries and renewed promises of growing love, is having a lackluster moment.
We are turning to the hearty, the starchy, and the baked
That doesn’t mean that people are cooking less. In fact, those of us who know their way around the kitchen are spending more time there. But instead of exploring all the ways that kale can elevate a salad, we are turning to the hearty, the starchy, and the baked. In this most uncomfortable period that psychologists have likened to grief, the changes in our relationship to food reflect what we are yearning for the most: Comfort.
Look closer and you’ll find the same patterns everywhere. We are watching more animation, family, and classic movies, and less crime and horror movies. We are listening to more classic rock and less pop. We’re buying board games and blankets. A comfy pyjama set called “Jayden” has become Victoria Secret’s best-selling item. And, knitting is hip again. Basically, if you’re wondering which businesses are doing well through the COVID crisis, your best clues might be found within the average person’s comfort zone.
Changes in streaming activity by genre from 7 weeks before the quarantine (January 26 to March 14) and 7 weeks after the start of the quarantine (March 15 to May 2), measured by Reelgood
Pundits have been quick to project these trends into the future — what’s been called the “New Normal”. Many of them see continued growth for prepared delivery meals, with increasingly sophisticated offerings. In terms of fashion, we would enter a new era of smaller wardrobes, with a greater focus on functionality and durability, and a larger role for individual craft. The more pessimistic voices have conjectured the death of live entertainment, office spaces, salad bars, business travel, and cruises. We’re further told that elbow bumps will forever replace handshakes and hugs. Those of us into sci-fi might relish the prospect of strolling on one-way sidewalks, dressed in virus-proof, sterilizable suits.
Feeling dizzy yet? If you’re a business operator, you know the importance of catching trends early and might be wondering what to make of all that. So let’s take a step back and attempt a critical assessment of the New Normal picture that’s been painted for us.
Every crisis spurs a flurry of bad predictions
My peeve with many oracles of the New Normal is how unbothered they are with extrapolating exceptional circumstances into the long term, and calling that “normal”. I’m not saying that all of them are wrong. But this is a familiar pattern. Every crisis spurs a flurry of bad predictions. In the aftermath of 9–11, the most salient one was that the era of tall buildings had ended. Some, including Harvard economists, forecasted that downtown NYC’s real estate market would never recover. It did. And buildings have kept going taller.
It’s even more curious to see how fanciful New Normal conversations have gotten when you consider that our current situation was not prompted by systemic problems, unlike say the 2008 crisis. Back then, the factors that got us in trouble, namely years-long reckless practices in the financial industry, were very much internal to our systems. A cornerstone of our economy was rotten and crumbled, triggering a chain collapse across sectors. Even as that was happening, a consensus was forming around the urgency to change some of the ways that we did business (whether we effectively did so is a different story). Yet, I don’t remember reading as many New Normal prophecies back then as I have in the past two months.
Spanish-Flu and how we forgot that we forget
By contrast, COVID is a Black Swan. An unpredictable event with origins *outside* our economic systems and massive consequences. As such, COVID disrupts but doesn’t fundamentally question the way our societies had been operating. Imagine that within a week from today, by some miracle, scientists had created a COVID-vaccine and distributed it to all of humanity. Very shortly, the world would be back on its feet, looking back at the crisis as a tragic-but-past hiatus. Of course, the longer it takes to develop a reliable vaccine (or acquire herd immunity), the more economic destruction we will see, and the longer it will take to rebuild our economies. As we recover, we will likely start channeling more investment into things that can make our systems more resilient. But the changes we will experience in our daily lives — how we interact, shop, work, eat, etc. — will take place in small, perhaps barely perceivable, increments. And COVID will quickly exit our consciousness.
Is that hard to believe? Consider the most commonly-cited historical precedent to the COVID crisis. The Spanish Flu of 1918–1920 infected more than a quarter of humanity, killing 50 million people worldwide, including 675,000 Americans. Local governments across the US enforced social distancing rules, established curfews, closed up schools and social gathering venues, and imposed the wearing of face masks. The situation 100 years ago bears remarkable similarities to the one today. Yet, as early as the mid-1920’s, you could hardly find the Spanish Flu mentioned in any newspapers, books, songs, or artworks. As puzzling as it may seem, people and businesses were quickly back to making decisions without factoring in the Spanish Flu, at least not consciously. Historians have labeled this “mass amnesia”.
“Sorry mister, no ride for you until you get a mask!”
The Swine-Flu couldn’t stop us from eating pork
Here’s perhaps even more compelling historical evidence that, as a society, we quickly move past epidemics as soon as the risks have subsided. Check out the global production of pork meat between 2000 and 2018. It grew by roughly 33%, much faster than the world population at “only” 24%. Mid-way through that period, the swine flu pandemic hit, killing close to 300,000 people worldwide. Yet, it barely made an impact on the pork meat market, if not for a brief slow-down between 2010 and 2011. By the way, you’ll reach similar findings if you studied the impact of mad-cow disease on the beef market.
Pork Meat production in millions of tons (Resource: Our World in Data)
These observations are particularly interesting for our conversation because a growing number of people are surmising that COVID could trigger an irreversible decline in the meat industry and a surge in plant-based proteins. To be fair, a number of these voices are activists overtly advocating rather than simply predicting a shift in eating habits, using important arguments. Still, history is the best predictor of what the New Normal could look like. And if diseases transmitted through animal meat, like swine flu and mad-cow disease, didn’t make as much as a dent in the growth of meat consumption, one can doubt that COVID will.
In fact, we can already see signs that the recent drop in meat consumption is not the result of changes in consumer attitudes towards meat. A month ago, we at Bernoulli Finance were proud to see one our longest clients, The Local Butcher Shop (TLBS), featured in several articles about local businesses that were thriving through the COVID crisis. Located on Berkeley’s main drag, TLBS is dedicated to locally-sourced, sustainably-raised, fresh meat. Since the COVID crisis started, it has seen 40-minute customer lines form at its doorstep. Its online business has also exploded with the number of orders growing from a couple to about fifty per month!
Understandably, the multiplication of COVID outbreaks in industrial meat processing plants is making people question the safety of eating meat. However, stories like TLBS’s should be indications that people are not rejecting meat products per se. They are rather awaiting stronger safety guarantees from the meat supply chains, and in the meantime, adapting to the circumstances. And since the vast majority of people do not have access to guaranteed safe sources of meat, adaptation means eating less meat or even no meat at all for a while.
Even the shortages and wars don’t break consumer attitudes
Similar adaptations are happening across the entire spectrum of consumer habits. And sure, some of that might stick beyond the end of the crisis. We might experience collective realizations that we can do certain things differently and better than before COVID. One example has been the subject of a viral meme that says: “I guess we’re about to find out which meetings could have been emails after all…”
I guess we’re about to find out which meetings could’ve been emails after all...
— Sara Wallace Goodman (@ThatSaraGoodman) March 8, 2020
But let’s not exaggerate the importance of this collective Aha! mechanism. It’s not an accident that the one example I could find is about how we conduct business meetings. The shift from in-person to virtual meetings started well before COVID. Thus, the crisis here has merely acted as an accelerator — not an instigator — of an already solid trend. Moreover, business meetings are not ordinary consumer practices because they are highly shaped by businesses’ assessment of their operational needs. Typically, people’s cultures, beliefs, feelings, and other factors that make up consumer attitudes, play a far greater role in defining our behaviors. And if we know one thing about consumer attitudes, it is that they’re highly enduring.
To get a sense of how enduring consumer attitudes are, I’d recommend reading “The Gentle Simmer”, a piece by Bernoulli Finance’s Anjali Oberoi, published on The Workshop. It explains why consumer trends, especially in food, are snail-paced. The average consumer dips into the unknown one toe at a time. Even crises that force people out of their comfort zones and expose them prolongedly to novelty, don’t change consumer attitudes as much as you might expect.
A latte made with caffè d’orzo, once a popular ersatz coffee
In the years between WWI and WWII, much of Europe went through periods of poverty and shortage. That’s when the German word “ersatz” became popular and crossed over to other languages, including English. An “ersatz” is a product substitute, often but not necessarily of lesser quality than the original. By the late 1930’s, it is said that 90% of German clothes and furniture were ersatz, so were 50% of German foods. It is hardly surprising that ersatz timber-based clothes, which would shrink by a good fifth under the rain, didn’t have much of a future after WWII, when wool trade reopened. One could be more intrigued that certain coffee substitutes, chief among them roasted barley, disappeared just as fast. Not only was “barley coffee” cheaper than coffee, but for centuries it had enjoyed a place of its own in certain culinary cultures, like the Italian where it is called caffè d’orzo. Why, after more than a decade of loyal service, was barley coffee so quickly thrown out of German pantries?
The word “culture” is key here. Culture endures. Consumer attitudes endure. And it takes more than a few years of shortage and adaptation to make a society forget its cultural references, how people like to trade, how they like to eat, how they like to interact, how they like to workout, how they enjoy life. As the COVID threat ebbs, COVID-amnesia will flow, and we will embrace again our pre-crisis habits.
So, what will change?
Maybe it is the indiscriminate nature of the COVID threat that no amount of wealth can cancel. Maybe it is the apocalyptic quality of the COVID downfall. Maybe it is the ineptitude of our government and its horrid consequences. Maybe all of that is making it impossible for some of us to imagine that the New Normal could, like I suggest, look a lot like the “Old Normal”.
Mind you, I am not saying that COVID won’t transform the world. It will. But the transformations of our “Normal” will happen progressively over years, through hardly noticeable shifts. And, to discern the direction of that slow tide, we’re better informed by the aftermaths of past pandemics than by our present situation.
So how did humanity historically react to global health crises? An accurate answer to this question is better sought in academic works than here. Still, for the purpose of adding some actionable insight to this piece, I’ll highlight three major trends identified through my research of this topic and discuss their relevance to small businesses:
Challenged leaders and more government
Pandemics create mass trauma because they bring to light the fragility of civilization. Typically, in the wake of a pandemic, artistic production takes a macabre turn, reflecting rampant disillusionment with life. Part of this disillusionment is directed towards society’s leadership, faulted for not effectively protecting its people. The political class is demystified and its legitimacy challenged. Cholera and tuberculosis outbreaks are considered a major reason behind the turbulent regime changes in France throughout the nineteenth century. More recently, the AIDS epidemics is seen as the main trigger for the Haitian uprising that culminated with the removal of the brutal Duvalier dictatorship.
To be clear, this rejection of political leaders is not a rejection of government per se. Quite the contrary. In the wake of pandemics, the idea of more government to support people and businesses tends to gain in acceptance and popularity. Despite three consecutive republican administrations (Harding, Coolidge, and Hoover) following the Spanish Flu, US non-military expenditures remained remarkably high through the 1920’s, more than twice the pre-WWI average. Across the Atlantic, the Spanish Flu of 1918–1920 is considered the main impetus for the emergence of the modern Scandinavian welfare states.
The Scandinavian countries are often epitomized as successful economic models, combining free-market and important welfare programs. And, entrepreneurs should be reasonably optimistic if the US were to drift towards these models in the coming years. The World Bank has consistently ranked the Scandinavian countries among the best in the world to start a business. Also, the four Scandinavian countries literally top the list — way ahead of the US — in terms of social mobility, which, in general terms, speaks to the ability of an individual to improve his/her social status. The importance of that is not to be understated: the more people across socioeconomic classes feel that opportunities exist to grow their personal wealth, the more they will be willing to take risks, create, and undertake. In other words, high social mobility is a crucial ingredient for a thriving small business ecosystem.
Evolving hygiene and public health
Ad by the Kentucky TB Association, circa 1945
Tuberculosis was a leading cause of death throughout the 19th century on both sides of the Atlantic. To understand how prevalent it was, try counting the number of literary characters from that period who were inflicted with it, most notorious among them Dostoevsky’s Katerina Ivanovna in Crime and Punishment, and Victor Hugo’s Fantine in Les Miserables.
The long-term impact of tuberculosis is perhaps best appreciated through the mid-century emergence and lingering dominance of the “hygienist movement”, a loose set of social and political theories with wide-spreading practical applications. Both London and Paris owe their modern sewage systems and sidewalks to that movement. The movement provided the impetus for the development of public transportation with the aim to reduce urban densities. The popularization of physical exercise and the revival of the Olympic Games also take root in hygienist theories.
At the turn of the century, as the threat of tuberculosis started fading, so did its salience as a social and political issue. But the hygienist movement continued thriving through the 20th century. Tuberculosis has not been on top of people’s minds for some time now, but it has transformed the way the world thinks about hygiene, personal wellness, and public health.
We’re likely to look back at COVID in a similar fashion. Even as the COVID threat stops guiding our daily decisions, this pandemic will have a lasting impact on public policy and social behaviors. Sure, face masks could become common apparel in public spaces, as it has been for decades in Japan. And, sure, most people may take to the habit of washing hands as soon as they enter a new place. But, instead of playing a guessing game as to which COVID-related measures will stick or disappear, we’d make better use of our time thinking about the larger and farther-reaching trend: in the coming years, people are going to be more intentional about living healthier lives. For some of us, this could mean moving to the countryside, for others paying greater attention to the origins of foods they eat, for yet others becoming activists for cleaner air and water, etc. In summary, the New Normal will come with far fewer small disruptions than predicted, but far deeper long-term transformations.
Divisiveness
This piece ends on an unhappy but important note. History tells us that epidemics are divisive. People in disarray are quick to designate scapegoats. The Great Plague that ravaged Europe in the 14th Century led to thousands of massacres of Jewish communities. In 19th century France, the spread of tuberculosis was pinned on the “moral depravity” of the working class. More recently, crimes against homosexuals rose by double-digit percentages during the AIDS epidemics of the 1980’s. And so, when Donald Trump and his goons label COVID the “Chinese Virus”, they’re embracing a centuries-old antic aimed not only at deflecting blame but also at harnessing the xenophobic impulses that emerge during epidemics.
So I lied. This point contains no “actionable insight”. Just a call to readers, especially fellow entrepreneurs. Contrary to what the optimists among us, enthralled by feel-good stories of kindness and solidarity, might think, in aggregate, COVID will fan the already sky-high flames of divisiveness that have been tearing our social fabric. And it is always tempting to disengage from these issues at work in the name of political neutrality. Yet that position is delusional. Our workplaces, virtual or physical, reflect the ills of society. COVID makes it more relevant than ever for us to understand how our businesses sometimes perpetuate the most odious social dynamics, and how we can fight them.