The Decades of Disruption

“As sure as the spring will follow the winter, prosperity and economic growth will follow recession."
- Bo Bennett

“Nothing in life is to be feared; it is only to be understood. Now is the time to understand more, so that we may fear less.”
- Marie Curie

Are these truly unprecedented times?  

Or have we lived through this type of thing before?

The global shutdown? 

Well, yes, that’s definitely a new one.  

But viral diseases? 

Eh, no, not really. 

Folks, we’ve had worse. Much worse. And we’ve overcome worse and expanded and grown through it.

During times like these, in the midst of what are perceived as disasters, some of our best, most valuable, and impactful inventions arise.  

From fear comes understanding, which in turn locks fear back in its mental cage.

And technological progress always confounds the pessimists by solving scarce-resource problems and fuelling productivity and prosperity, just as it did in the 1920s after the last pandemic.

And now it’s set to do so again in the 2020s. 

The only difference a century onwards is the speed at which those changes happen. 

The high-octane fuel driving today’s change velocity is Generation Y - the largest generation of people to ever hit the US economy.  

They will drive us ahead of global competition faster and farther than we have ever witnessed. 

But like all change, the naysayers will tell you to be afraid of it. 

Back to "The End"

Say goodbye to unproductive things. 

Sadly, that will mean many low paying jobs as well.  

But that’s what happens after massive setbacks. Complacency and the norm are upended.

It’s easy to forget the moments that launched these types of significant change, as they’re often lost in the drama and massive disruption of the moment. 

As I’ve said for many months and moons over and over again: The 2020's and 2030's are the decades of disruption.  

Roll Back

As reminded, this is what things were like back in 1982 when I first started in this business:

• We mailed things. 
• If I wanted to communicate with a client on the west coast, I sent them a letter in an envelope. And when it was dropped in the box, we placed a reminder to ring them to follow up on our calendars – seven days later!
• There were no cell or smart phones yet. If you were at lunch, you had to wait to get back to the office to find out what happened and who called. You were handed those little pink slips that read "While You Were Out." There were no texts, no notifications, no Internet, no beeps, no email.

That was just 1982.

Now, for the sake of perspective, we roll back a bit further to the Spanish Flu pandemic of 1918 infected roughly 500 million people and killed as many as 50 million of those getting ill.  

At the time, the world population was about 1.8 billion people, with a staggering 28% infection rate and a near 3% death rate.

And while it might seem a lot worse, the stats are currently significantly lower for COVID-19. 

Today, the global population is about 7.5 billion, with roughly 20 million cases of COVID and 735,000 deaths worldwide so far.

Now, please keep in mind from a financial perspective that, “Markets are not about ‘What's Now?’ They are about ‘What's Next?’”

So, what happened ‘next’ when last we encountered a pandemic?

Some pretty good stuff, actually. 

The good news is that the bad news during the previous pandemic precedent was followed by the “Roaring Twenties.”

As we’ve already kicked off the 2020s with the pandemic and a meltdown, there’s plenty of the decade left for a lengthy runway of prosperity to become much like the precedent of the 1920s.

The driver of the coming boom is more than obvious by now, for reasons we have shared for years:  Technology-driven, productivity enhancement across ALL industries, services and consumer actions. 

Dr Ed Yardeni reminds us that the late 1700s saw grim-reaper type forecasts from Thomas Malthus.  "He was the first economist, and he was an extreme pessimist. He predicted that populations would grow so fast they would outstrip the capacity for food production." 

He was, eh, dead wrong.

In fact, agriculture was among the industries that benefited the most from the Industrial Revolution of the 1800s.

Never forget, technology fuels the three P's: productivity, problem-solving, and prosperity.  It did in the 1920s after the 1918 pandemic and it is already doing it again in the 2020s.

Dr Ed writes: "In 1920, 51% of the US population lived in cities, up from 23% in 1870. This remarkable urbanization was enabled by innovations in electricity and plumbing. Electric grids provided clean, bright light without emitting smoke. Urban water networks supplied clean water, and sewer systems removed waste without the pungent odours of chamber pots and outhouses. Telephones allowed people to converse with distant friends.

“Henry Ford’s Model T, built between 1908 and 1927, was the first car invented and helped people to live an easier life by making transportation easier and faster. In 1900, just 8,000 motorcars were registered in the US, but there were 9 million in 1920 and 23 million in 1929. Streetcars and subways, unheard of in 1870, were in all the major cities by 1920. Intercity trains were becoming steadily faster and more reliable. Detroit Police Officer William Potts came up with the idea of traffic lights, taking inspiration from railroad traffic signals. General Electric bought the idea for $40,000, and traffic lights soon were everywhere.

“Ford’s assembly line innovation boosted productivity in many manufacturing industries, including the processed food industry. National food brands—including Heinz, Campbell’s, Quaker Oats, Jell-O, and Coca-Cola—began to fill cupboards. Refrigerated railroad cars and in-home iceboxes meant that vegetables were available in winter. Restaurants began to proliferate early in the 20th century. When people out and about in their Model Ts got hungry, their options were few, but the first fast-food chain opened its doors in 1919, an A&W (better known today for its root beer). White Castle hamburger stands opened in 1921, and the first Howard Johnson’s restaurant in 1925.

“Increasingly, anything not available in a local store then could be obtained by a mail-order catalogue. The Montgomery Ward catalogue was first issued in 1872, the Sears catalogue in 1894. By 1900, Sears was fulfilling 100,000 orders a day, and its catalogue featured fur coats, furnaces, furniture, and much more—including homes. Sears sold more than 70,000 mail-order homes between 1908 and 1940. The catalogue business was helped along by Parcel Post, which arrived in 1913."

All of this unfolded after the pandemic.

Or maybe we should better say, BECAUSE of the pandemic.

Technology always defeats the sellers of fear and trepidation, even though the audience is always ravenous for that drug in any form.

Here’s the numbers from Dr Yardeni and his team on record-setting TECH capital spending:

• High-tech spending on IT equipment, software, and R&D rose to a record $1.32 trillion (saar) during Q2-2020. 
• It jumped to a record smashing 50.1% of total capital spending in nominal GDP during the quarter. 
• Equipment and software accounted for 31.1%, while R&D accounted for 19.1% of capital spending in nominal GDP.

Seeds Already Planted

We can all be confident that the technological revolution ahead will bring benefits to the entire world, from every crack and crevice of business and services.  

How?  

It’s all about R&D trends and the investments we’ve already made.

The important overarching themes will massively outrun COVID-19, and likely sooner than most fear.