Vladimir Avdeev, co-founder of Boxblaster VR, posits that things for the world and our industry might not be as bleak as some predict, and walks through other crises and downturns faced by modern society to support his position. The COVID-19 pandemic has caused illness, death and shutdowns across the globe, and has its own unique challenges, but Avdeev points to the social nature of human beings as one of the main drivers for why this may not result in a wholesale change to modern life. Read his interesting and well-researched views below.
Nothing will change once the pandemic is over, and here is why
By Vladimir Avdeev
Every time we face a new crisis, I hear how the world is going to change, and nothing will ever be the same again. It was that way with the dot-com bubble in 2000 when Michael Moritz, a general partner at Sequoia Capital was saying, “You’d be a fool to invest in an e-tailer that sells books today or wants to go into any other well-recognized market,” and many others shared his opinion. But if we fast-forward to today and look at Amazon, it’s evident that these predictions fell through. If you had invested $1,000 in Amazon at its IPO in 1997 and chose to weather the storm of the 2000s by holding on to your investment, it would amount to $1,129,186 with 600 shares as of February 20, 2020. Back then, everything looked like a riches to rags story. Jamie Riddell, one of the British pioneers of internet advertising, summed it up well, “the pendulum had swung wildly from “everyone’s going to be a millionaire by Christmas” to the “internet is dead.” Once again, though, if we look at our world today, it is clear that the internet was far from dead, it was just starting and faced a readjustment.
Then was the credit crunch of 2008. Many were convinced that the economy wouldn’t recover for years. J.P. Morgan released a report questioning the dollar’s status as a reserve currency. Roger C. Altman, former U.S. Deputy Treasury Secretary, suspected that “stricter lending standards will prevail for the foreseeable future” and questioned whether a “new global approach to controlling currencies, banking, and financial systems” was needed.
By now, we know – some of these suspicions didn’t pan out. The dollar remains the world’s reserve currency, and businesses in various areas, while having experienced a downturn, have managed to recover and not completely disappear off the radar. Of course, there were changes. A new generation came with new habits, technologies and behavioral trends. Social media is just one such innovation that our parents couldn’t have even predicted, but that has sprung, and we barely remember how the world was before it.
Another crisis, one that is perhaps most similar to the current one, was the SARS scare of 2002-2003. While the fatality rate of 14-15% was undoubtedly a fright-inducing number, some people saw it as “completely out of proportion” and questioned why other health issues like HIV/AIDS or Malaria didn’t get equal levels of attention. Yet, similarly to now, the panic quickly spread throughout the world as people were afraid of the unknown. Patrick Dixon, an expert on global trends at the London Business School, went as far as to say, “This is potentially a far more serious epidemic than AIDS. If things continue as they are, then a pandemic is surely only a matter of time.”www.businessinsider.com/deadly-sars-virus-history-2003-in-photos-2020-2%5B/caption%5D
Even experts on respiratory diseases like Peter Openshaw couldn’t see the end to SARS, “Even with containment, I don’t see any reason why it should fizzle out. It’s not spreading as fast as the Spanish flu did, but that doesn’t mean it’s not spreading as surely.” However, despite the initial information blackout, isolation measures and international cooperation eventually contained the virus before more damage could be done.
Changes did come about post-SARS. A Telegraph article that examined what it was like to return to Hong Kong after the pandemic pointed out how “people are now much more focused on hygiene than they were pre-SARS.” Behavioral changes were particularly visible in schools, where a no-tolerance policy regarding cold symptoms and fever was enforced.
Additionally, research by Y.C. Richard Wong, Professor of Economics at The University of Hong Kong, illustrated that “initial alarmist reports and estimates about the impact of SARS were not borne out. The economic impact of SARS on consumption, tourism, and travel-related services turned out to be relatively short-lived. Fear and panic subsided quickly once the outbreak abated.” As is shown on the graph below, tourist arrivals and departures dropped significantly during the SARS crisis, but picked up quite quickly and returned to higher levels than pre-SARS. The fearful predictions, luckily, didn’t hold up.www.researchgate.net/publication/24089623_Economic_impact_of_SARS_the_case_of_Hong_Kong%5B/caption%5D
As the COVID-19 crisis covered the entire world, we are all once again faced with uncertainty about the economy, businesses, health, and what our life will look like once the pandemic is over. We already hear predictions on how everything will be different; we will enter a “new normal,” and the world will have drastically changed from what we’ve known. We will never enjoy a movie at a cinema, shopping malls will shut down, and we will all be making our purchases exclusively online. Entertainment will consist of at-home options like Netflix and Twitch. Office spaces will remain empty, and employees will be working from home all the time. There is no denying that the pandemic is a real issue, and a full back-to-normal may only be possible after a vaccine is discovered, and the health threat is eradicated. But what if we take the research from previous crises and current human behavior to deliberate on what the world will look like after this pandemic is over?
How COVID-19 affected all industries
Of course, this is an unprecedented time, and I can’t know for sure what our lives will look like after the crisis has passed. However, I suspect besides the unimaginable losses it has caused, what the crisis has done is accelerate the growth of areas that have already been on the rise before the pandemic. For example, retail e-commerce sales worldwide have increased from $1.33 trillion in 2014 to $3.53 trillion in 2019, and revenue in the online food delivery segment was already rising from $76.1 billion to $122.7 billion in 2020.www.visualcapitalist.com/media-consumption-covid-19/%5B/caption%5D
Visual Capitalist illustrates that since COVID-19, content consumption has transferred mainly to online mediums; video content has boosted in popularity. However, this was already happening before the crisis. If we take a look at Netflix, its subscriber growth over the last five years has been steadily increasing even before COVID-19. According to Statista, it went from 70.8 million in 2015 to 167.1 million in 2019. So what’s happened now? Everything just got accelerated as people began to spend more and more time consuming content online.www.statista.com/chart/10311/netflix-subscriptions-usa-international/%5B/caption%5D
Unfortunately, what this crisis has also done is accelerated some downturns that have been long developing as well. For example, J.Crew Group has filed for bankruptcy, but experts believe that the company has been facing challenges from its enormous debt long before the coronavirus struck. This is just one example of the sad truth – if your business was running inefficiently and with growing debt, a closing or restructuring would’ve likely been inevitable anyway. If not in 2020, then perhaps in 2025, if COVID-19 hadn’t accelerated the process.
We also see huge difficulties in the entertainment industry. Cinemas are experiencing immense hardships. Some are filing for Chapter 11 bankruptcy protection, and others are struggling to put up a fight with premium video on demand (PVOD) releases by studios. The recent discord between Universal Studios and AMC Theaters is just one such example.
So, yes, things have changed, and some business models may disintegrate. Some entertainment venues will go out of business, especially those that were struggling before coronavirus hit. The crisis wave will quickly erase any companies that were ineffective and make space for those with sustainable business models and truly unique offerings. 2020 will be difficult in terms of customer behavior as we suspect people will be cautious while returning to their regular lives. However, we still have to see whether their preferences and personal choices will be drastically affected in the long term.
The need for socialization is ingrained in human biology
Let’s not forget: human beings are social creatures. We want to go outside, get together with friends and family, and share unique experiences. It’s even been proven by Dr. Robert Waldinger, a psychiatrist, and director of the Harvard Study of Adult Development, that “good relationships keep us happier and healthier.” It turns out that people who are more socially connected to family, to friends, to the community, are happier, they’re physically healthier, and they live longer than people who are less well connected. It’s becoming even more evident now, with protests springing up across the U.S. as people grow tired of staying home and want to get back to work and living. Likely, this is not only due to financial strains but also because staying home for a month (or two or more) is bound to make people miss the social interaction.www.theatlantic.com/ideas/archive/2020/04/party-aggrieved/610318/%5B/caption%5D
Of course, this may be an extreme example. But the phenomenon already has a name – quarantine fatigue. Researchers at the University of Maryland have discovered that people are now going outside more frequently and traveling further than they did even a few weeks ago. People seem to get tired of staying home for the entire month as, according to research, the percentage of stay-at-home citizens has stagnated at 35% for three weeks, despite quickly rising by 15% during the onset of COVID-19.
Why is this happening? Don’t people know how imperative it is to stay home at a time like this? We do, but it turns out it also goes against our nature. For instance, the digital magazine Sapiens has recently addressed the issue with a post on why social distancing feels so strange. George M. Leader, an archaeologist and professor at The College of New Jersey, explained that the answer lies in the fact that humans are inherently social creatures. He points out, “since our evolutionary split from chimpanzees around 7 million years ago, humans have become increasingly dependent on complex social cooperation to survive and thrive.” So, that’s why many are growing tired of staying home and are eager to return to work, hang out in their favorite venues, and be able to travel to visit new places. We can’t be contained for too long as it is ingrained in our cells that socialization is a means of survival.
However, I do not deny the fact that there will be changes. Our world was already en route to becoming freer, with the freelance economy growing and people preferring to work remotely. The trend has been on the rise throughout the last 10 years, just take a look the graphic below. Global Workplace Analytics have discovered that remote work has increased by 44% during the previous 5 years and by 91% over the last 10.www.flexjobs.com/blog/post/remote-work-statistics/%5B/caption%5D
Undoubtedly, the coronavirus has accelerated that transition. And while some people may have found that they prefer to work remotely or have more flexible schedules, there are others who don’t and who thrive in environments with lots of social stimulation. People are different, and as always, we shouldn’t generalize. I think that while there will be an increase in remote working, it will come from those who were already preferring that kind of arrangement. Others will still choose to go to offices or co-working spaces and make the most of the collaborative environment that they provide.
Will online content consumption fall in the summer?
If you still think that we will return to a whole new world following the pandemic and that everyone will be more distant than ever, let’s take a look at urbanization. The UN predicts that by 2050 “68 percent of the world’s population will live in urban areas.” Take any metropolis you know and imagine how many people live there. Many are in small, central apartments, often with flatmates, with quick access to public transport and social venues. People don’t spend all that much time at home. Instead, they go to the gym, cafes, work, and entertainment facilities, returning home to sleep.
So imagine, when the entire world will be coming out of quarantine together. In the summer. After months of social distancing in their urban apartments. What will they want? Social interaction. Of course, everyone will be more careful and conscious of hygiene, but the inherent human nature which had to be suppressed for weeks will finally have the ability to come through. People will no longer stay cooped up at home watching YouTube, Netflix, and on FaceTime with their friends. Instead, they’ll be craving in-person human interaction.
For now, we will have to wait and see what the online landscape will look like once everyone is out and about. Will online content consumption keep increasing, or will it suddenly plummet? Will people stay home voluntarily, fearing to interact with others, or will they be excited for some out-of-home activity after weeks in isolation? All in all, I wouldn’t hurry with making hasty predictions and betting everything on online channels.
It’s human nature to socialize, and while the online media isn’t going anywhere, we ought to be cautious and not put all our eggs in one basket. Let’s do our best to stay positive and look for ways to pivot or enhance our businesses after this challenging time. The coronavirus will pass, and there will be challenges which everyone will have to face, but humans will stay human. We still want social interaction, sharing experiences, and creating unique memories together. Coronavirus won’t be able to change that. So stay strong, stay safe, and I hope we will all see each other soon!