The Pandemic That Broke the Camel's Back

COVID-19 is going to be the last straw for inefficient organizations that relied on proximity and the status quo to protect their sacred cows. The emperor wears no clothes in a world that is socially distant yet still continues to move forward.

In June of last year when I left WebMD and decided that I had had enough of the endless job cycle, I made a decision that while novel then will become an option for countless professionals in the coming weeks and months. A technology executive to several companies in the past 15 years, I had spent that time not looking for the one job where I could stay forever, but consistently hunting for new opportunities. I joined startups, I went back to companies I had worked for in the past, I came to places for M&A opportunities. This movement in the tech industry is not uncommon, particularly as you work your way up the pay ladder. As companies try to curtail the growing costs of their staff and employees consistently seek marginal improvements in pay and benefits, the idea of loyalty has shriveled. There's only so much that strong company culture and mission-driven leadership can do to prevent this.

This observation of the world before the COVID-19 pandemic is not important as any sort of reflection of how industry and the professional class view each other, but rather as a predictive moment of how a disruptive change to lifestyles, priorities, and the infrastructure of the economy will break the status quo permanently as the dynamics are fundamentally altered. The idea of disruptive innovation piloted by the late Clayton Christensen identified that the success of a business or any operation at scale removed the incentive to risk that success for an even greater efficiency. If you operate a dairy farm, you're unlikely to invest in trying to develop a synthetic milk because while success would mean that you would not have to spend money on maintaining a herd of cows, failure in developing such an alternative product would likely end the entire business. The interaction of the professional class and industry, particularly in the technology industry - has been a story that is largely that of the desire to marginalize or arbitrage labor costs. The talent that powers the technology industry - software developers, designers, testers, and management, all have average salaries well above the national average income fueled by a combination of scarcity, education costs, and the cost of living in key areas of the industry.

COVID-19 is not a change agent. It is not a hot Silicon Valley startup. COVID-19 is a cataclysmic event. Paleontologists often refer to a layer of rock in the fossil record called the KT boundary. Below this line, dinosaur fossils are plentiful. Above the line - they vanish entirely. The early 2020's represent a new boundary in how many people learn, live, and work. The ways we accepted things to be prior to March of 2020 are for most of us, no longer true. As such, we must now look ahead and discard our ideas about how the past translates into our future.

You will never go back to work again

For many people, remote work was only a benefit or a novel comfort on the fringes of what they were looking for in a job. But for the past 3 months, employers and their employees have been forced to operationalize around remote work as the only option to remain productive. When businesses are forced to change how they operate so fundamentally, it is almost impossible to reverse the momentum of that change. Such expense and investment goes into supporting these changes that the case for undoing them never presents itself in a way that makes sense. Businesses have been presented with a simple calculation: is your workforce productivity worth the cost of the real estate footprint that your business pays for in rent? The answer on the whole is a resounding no.

At the same time, employees have seen that there is a way to work that allows for better balancing of work priorities and life priorities. Long commutes for those opting for some financial relief from the high cost of living in the urban centers are no longer, creating the one asset that there is a limited supply of: time. For families, the option of remote work has been almost a necessity going forward while child care and schools remain closed. This will not only endure through the summer months, but without a vaccine available there are likely to be families who elect to continue homeschooling next fall even when schools open back up. For employers, remote work will no longer be a benefit but a necessary way to access talent.

You do not need to live where you work

In many ways, the idea of "working remotely" and "working anywhere" are now the same thing. For employers, it's not like this is really anything new - outsourcing and contracting are an integral part of managing the workforce. But the lines are now increasingly blurred between what it means to be an offshore worker and just a remote worker. The biggest difference - cost, is something that will now come into focus as a compromise that will give workers flexibility and provide a broader talent market for employers. Facebook announced this week that they will not mandate that their workers return to the office, but that those who work remotely will have their compensation adjusted based on the market in which they live, not the market where their employer is based. This is terrifying for large metropolitan areas like Boston, New York, and San Francisco that are built on the back of wage escalation in the technology sector over the past two decades. The choice to live in a major city in the future will be a lifestyle choice - not a choice based on the scarcity of employment opportunities in lower cost regions and suburban or rural areas.

Will this change the patterns of job switching that we have seen increase in the past 10 years? Unlikely, and in fact this is likely to exacerbate it in some ways. With both employers and workers free of the commodity of proximity, the market for work will broaden dramatically. Talent in Little Rock, AK can now compete with talent in Las Cruces, NM for a job in Tampa, FL. The gig economy - once reserved for ride hailing services and food delivery, will now be available to almost anyone in a sector where presence and proximity are no longer factors. Salaried professionals will become hourly. Workforces will scale up and down based on demand without decapitating layoffs in more challenging financial times.

You will bring your own benefits

When you can work anywhere for anyone, there is an exchange that that flexibility creates. In a gig economy that is available to all professionals, the idea of benefits will become antiquated. You will for for anywhere for anyone and at anytime. Paid time off and paid sick leave - where it exists, will be something for the worker to manage through something that resembles self-insurance. I have a spreadsheet that tracks my target personal income for the year based on my gigs, and it prescribes based on how much I've exceeded my income targets how much I can "pay myself" when I don't want to work. This financial discipline will be requisite in a world where this work flexibility is available.

Health insurance benefits will also become increasingly an individual responsibility rather than something coupled to the notion of employment. If the notion of employment being linked to health insurance was ever to be challenged - the sudden unemployment of 40 million Americans certainly put a spotlight on the viability on that norm. New institutions like cooperatives or public unions will sprout up to give group discounts to the gig class - if the idea of health insurance itself doesn't crumble as demand for health services wanes as people avoid traditional care delivery institutions. This applies to all other fringe benefits typically associated with employment - retirement benefits, disability insurance, life insurance, etc.

You will not take on debt to send your kids to college, if they go at all

I've been downright critical of higher education for a while now, and none of the dynamics have changed. COVID is the spark. Right now, millions of graduating high school seniors have been shown that what their college of choice does when the marketability of a brick-laned campus is no longer an option - that learning moves online, it all looks like the same product. When education is seen as a commodity for most, a decision needs to be made: would you pay $30,000 a year for an online education that someone else might offer for $1000 a year? The answer again, is no.

That is not to say that these products will not be valuable, but they will compete with other options like General Assembly, Khan Academy, Praxis, and others that focus on immediately marketable skills that are well aligned with the new services on demand economy. Many will not survive. Schools without large endowments, largely dependent on the hand-to-mouth economics of collecting tuition will die. And just like with the elimination of proximity as a factor for the workforce, schools will have to go even further to compete for students in remote geographies. This dynamic - already employed with full vigor by schools like the University of Southern New Hampshire will create a massive competition for students, driving prices down and forcing most curriculum to be delivered through prepared content like pre-recorded video and slide decks to reduce labor costs.

Other changes may not be what they seem

This is but a sampling of some of the societal and structural changes that COVID-19 has opened the flood gates for. But there are other changes we are seeing that may not be any change at all. Not every exploited opportunity represents a fundamental change in lifestyles, behaviors, or habits - but they may be hiding inefficiencies that may still come crashing down.

Delivery services, particularly grocery delivery services - are not here to stay. In the immediate onset of COVID-19 with many municipalities locking down, services like Instacart and Doordash hired rapidly to respond to the huge demand for delivery services. This is not a permanent change. Regardless of the fear of COVID-19, the grocery business has always been a business that has been forced to shore up margins, largely through reducing its labor force. 70 years ago, your grocer picked the items in your order for you as a way to control quality. That later shifted to the consumer. Then we had self-checkouts, which attempted to trade losses through theft for reduced cashiering staff. Grocery delivery services achieve nothing for the grocer and inflate the cost of food for the consumer. When the threat of COVID subsides, people will either return to selecting their own groceries or there will be some other option that removes the grocer from the retail role entirely. What if wholesalers and farmer's markets are better appointed in the supply chain to provide consumers with availability and quality without the supermarket point of sale? There is a world where supermarkets don't go away, but rather contract in size and compete more with smaller retailers and convenience stores that have far less human capital expense, and concede a great deal of their business to a model that is more local and consumer direct.

The commercial real estate market will die. But it won't be converted into high end apartments, either. With the "work anywhere" workforce abandoning formal offices, there is a glut of commercial real estate supply coming to the major cities. What all of that empty real estate becomes is unclear, but as opposed to two decades ago when industry left cities and their factories were replaced with high-end luxury condos - the premium on urban real estate is at risk. Will people continue to flood into population-dense cities and continue the extreme demand on new housing? It's unclear. One possible outcome is that there is a great degree of flight of the wealthy urban class into the suburbs where housing has been equally supply limited in the past two decades, driving prices there to astronomical levels. Where does the existing suburban population, largely in the suburbs to avoid the cost of city living to begin with, go? If millions of square feet of commercial office space becomes affordable residential housing - do we see an inversion of the cities with the suburbs?

Nothing will ever be the same

Structural changes like we are seeing these days never flow backwards. When the coal industry was forced by regulation to clean up their pollutive practices, the undoing of those regulations did not result in the immediate removal of smokestack scrubbers or other equipment that was no longer required. Businesses that attempt to resume "business as usual" are about to face a new world where what they were doing before will not work the same way. When Boston College announced that they would open classes on campus this fall, it was clear that their only reaction to these changes was to act as if they had never happened. It is highly unlikely that this myopic view of the future is a sustainable path. Businesses and individuals that make the jump from the world in December 2019 to whatever the world will look like after all of the conventions we were used to are no longer there and act accordingly will be on the other side of this boundary. Everyone else will be relegated to the land before time.

Ryan Norris Ryan Norris

Ryan is the former Chief Product Officer at Medullan, CTO at Be the Partner, and CTO and General Manager at Vitals. He currently works as a fractional CTO offering strategy as a service to growth-stage companies in health care and education.

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