When will everything get back to normal? It won’t

The chan­ges the pan­de­mic has wrought won’t all sim­ply rever­se once Covid is behind us. This phe­no­me­non exp­lains why

Now that vac­ci­na­ti­ons against Covid-19 are under way, we’re all keen to get back to nor­mal as soon as pos­si­ble. Whe­ther opti­misti­cal­ly boo­king a holi­day for this sum­mer or more pes­si­misti­cal­ly viewing the start of 2022 as the sen­si­ble plan­ning hori­zon, we’re impa­ti­ent to revert to how things were befo­re the pan­de­mic struck.

But what does get­ting back to nor­mal look like?  It depends on who you ask. Some argue that the new atti­tu­des and beha­viours that the pan­de­mic for­ced us to adapt are now so ing­rai­ned, there’s no going back. Others see the­se new beha­viours as tem­pora­ry adjus­t­ments to a one-off shock and pre­dict a who­le­sa­le rever­si­on to type once it’s over. After all, they say, peop­le regai­ned their appe­ti­te for fly­ing wit­hin mon­ths of the 9/11 attacks. Ban­kers quick­ly reco­ve­r­ed their enthu­si­asm for pro­fits and bonu­ses after the glo­bal finan­cial crisis.

I would usual­ly lean towards the lat­ter argu­ment. Human natu­re tends to evol­ve slow­ly and our basic social and psy­cho­lo­gi­cal needs haven’t chan­ged. Yet I suspect many things won’t get back to nor­mal, even after Covid is lar­ge­ly behind us.

My rea­so­ning is based on the noti­on of hys­te­re­sis, first deve­lo­ped in phy­sics and then taken up by eco­no­mists. It basi­cal­ly means that the impact of a chan­ge on a sys­tem can­not be rever­sed sim­ply by taking away the for­ce you app­lied in the first place. For examp­le, when a magne­tic field app­lied to a pie­ce of iron is remo­ved, the iron remains at least par­ti­al­ly magne­ti­sed. The sys­tem doesn’t just boun­ce back after a shock – the­re is an endu­ring, some­ti­mes even per­ma­nent change. WCN article image 1

Here are four rea­sons things might never go back to normal:

  1. Struc­tu­ral adjus­t­mentsThe eco­no­mists who first used the term hys­te­re­sis obser­ved that, even after reco­vering from a major reces­si­on, the unem­ploy­ment rate was typi­cal­ly hig­her than befo­re­hand. This long-term “scar­ring” effect was thought to be cau­sed by a varie­ty of fac­tors, such as loss of skills, reluc­tance to invest, and adjus­t­ment cos­ts in rebuilding.In today’s eco­no­my, the risks of struc­tu­ral hys­te­re­sis are clear. If retailers, hos­pi­ta­li­ty and tra­vel com­pa­nies are allo­wed to go bankrupt, the rebuil­ding cos­ts will be huge and the impact on com­mu­nities will be long-las­ting.  This is of cour­se why governments are spen­ding a for­tu­ne on fur­lough and loan sche­mes to keep such busi­nes­ses going.  But even with the­se generous sche­mes, some busi­nes­ses will perish. We have alrea­dy seen many high-pro­fi­le casu­al­ties such as Deben­hams and Arca­dia in the UK, and Nei­man Mar­cus and JC Pen­ney in the US. Hys­te­re­sis can be redu­ced, but not eli­mi­na­ted: the high street of shops and restau­rants is going to look qui­te dif­fe­rent a few years from now.Interestingly, plat­form busi­nes­ses like Uber, Deli­ver­oo and Airbnb are much more resi­li­ent. They have been wide­ly cri­ti­cis­ed for not pro­vi­ding job secu­ri­ty to their workers but their low fixed-cost busi­ness model makes them high­ly resi­li­ent to an exter­nal shock, becau­se they can flex their capa­ci­ty up and down at a moment’s noti­ce. They pro­vi­de a buf­fer against hys­te­re­sis. Of cour­se, governments still need to sup­port unem­ploy­ed workers when demand dries up, but the cos­ts of bankrupt­cy and rest­ruc­tu­ring can lar­ge­ly be avoided.Practical tips:
    • Con­vert fixed cos­ts to varia­ble cos­ts. The more tur­bu­lent the busi­ness con­di­ti­ons, the more you want to rely on con­tract workers and part­ners, so you can flex them up or down accord­ing to demand.
    • Don’t cut too hard on your invest­ments in intan­gi­bles. Rese­arch by Ioan­nis Ioan­nou and col­leagues from the finan­cial cri­sis show­ed the com­pa­nies that wea­the­red the storm best were aggres­si­ve at cut­ting cos­ts but not in R&D and sta­ke­hol­der relationships.
  2. Chan­ges in con­su­mer beha­viour The­re have been obvious chan­ges in con­su­mer beha­viour sin­ce the pan­de­mic star­ted, and while some are clear­ly tem­pora­ry (I don’t want to meet my friends for a drink over Zoom – I want to go to the pub) others are likely to endu­re becau­se they are effi­ci­ent (online shop­ping) and/or enjoya­ble (movie streaming).Of cour­se the­se chan­ges are part of the broa­der digi­tal revo­lu­ti­on that has been under­way for twen­ty years, and it is right­ly argued that the pan­de­mic acce­le­ra­ted the adop­ti­on of new beha­viours around purcha­se and con­sump­ti­on. But it’s worth under­li­ning that the impe­tus for the­se new beha­viours came most­ly from the sup­ply-side of the mar­ket. For examp­le, uni­ver­si­ties had always insis­ted on in-class lear­ning, and esta­te agents had requi­red in-per­son viewings befo­re sel­ling a pro­per­ty, but they quick­ly figu­red out online alter­na­ti­ves as a means of stay­ing afloat. But the chan­ces are they won’t be able to rever­se the­se new ways of working post pan­de­mic, even if they wan­ted to. The cat is out of the bag. It seems likely we will end up in a phy­si­cal-digi­tal hybrid world in many sec­tors.  For examp­le, uni­ver­si­ty stu­dents can look for­ward to get­ting more of their basic clas­ses online, with advan­ced clas­ses, tuto­ri­als and prac­ti­cal ses­si­ons face to face.Practical tips:
    • Under­stand what’s chan­ged in your tran­sac­tions with users. Most busi­nes­ses aren’t just “pro­ducts” or “ser­vices” they are a com­bi­na­ti­on of the two. As a gene­ral rule, most ser­vice tran­sac­tions bene­fit from the human touch whe­re­as most pro­duct tran­sac­tions do not. So its worth map­ping your online user jour­ney and com­pa­ring it to what hap­pen­ed befo­re, to help you figu­re out which chan­ges will endure.
    • What busi­ness are you in? The pan­de­mic allows you to ask this ques­ti­on afresh, and perhaps to come up with some sur­pri­sing insights. For examp­le, the edu­ca­ti­on indus­try – which used to bund­le net­wor­king, cer­ti­fi­ca­ti­on and tui­ti­on into a sin­gle offe­ring – may never be the same again.
  3. Chan­ges in work­place beha­viourThe who­le­sa­le shift to vir­tu­al working for form­er­ly office-based employees was no less dra­ma­tic, and was also dri­ven by neces­si­ty rather than expec­ta­ti­on or demand. We now have a good under­stan­ding of how effec­ti­ve this huge social expe­ri­ment has been. Most of us are at least as pro­duc­ti­ve as befo­re, our abi­li­ty to get things done, espe­cial­ly tasks than can be easi­ly sub­di­vi­ded, has impro­ved, and oppor­tu­nities for online lear­ning are ple­nti­ful. On the other hand, crea­ti­vi­ty and col­la­bo­ra­ti­on are being stif­led, resol­ving tri­cky per­son­nel issu­es is more dif­fi­cult, and the oppor­tu­nities for pro­fes­sio­nal deve­lo­p­ment – for examp­le taking on chal­len­ging new assign­ments – are fewer than before.While a few com­pa­nies have pled­ged to allow vir­tu­al working to con­ti­nue post-pan­de­mic, most are gea­ring up for a hybrid model, with peop­le working from home may­be half the time, and care­ful con­si­de­ra­ti­on being given to get­ting the most out of their time tog­e­ther in the office. The­re is a clear hys­te­re­sis effect here, though dri­ven more by an effi­ci­en­cy impe­ra­ti­ve than by the needs or desi­res of workers.But the knock-on effects for the eco­no­my are huge. If the com­mu­ting levels in major cities like Lon­don fall by 20–30% post-pan­de­mic, the impact on com­mer­cial real esta­te, fast-food chains and pubs, train ser­vices, inde­ed the who­le para­pher­na­lia of ser­vices that pro­li­fe­ra­te in major city cen­tres, all of this will need re-eva­lua­ting.  Loo­king across all the long-term effects of the pan­de­mic on socie­ty, this may end up being the most significant.Practical tips:
    • Put some struc­tu­re around the hybrid working arran­ge­ments for your staff. Make sure peop­le are in the office for the col­la­bo­ra­ti­ve, inno­va­ti­ve and social-type acti­vi­ties that real­ly bene­fit from face to face con­ta­ct. You can be more rela­xed about whe­re they do their own indi­vi­du­al work, and inde­ed many of their meetings.
    • Actively mana­ge pro­fes­sio­nal deve­lo­p­ment. Espe­cial­ly while most peop­le are working from home, you need to find ways of giving them new expe­ri­en­ces, some­ti­mes in are­as they are less com­pe­tent at. Its good for their long-term deve­lo­p­ment, and for their short-term sanity.
  4. Government rules and regu­la­ti­ons Final­ly, how will government rules and regu­la­ti­ons chan­ge things post-pan­de­mic?  As alrea­dy noted, the government’s first eco­no­mic (rather than health-rela­ted) task was kee­ping the who­le sys­tem from col­lap­se, and as soon as that is resol­ved, their next task will be to find ways to pay for their inter­ven­ti­ons – which will mean hig­her taxes and tigh­ter public spen­ding for years to come.But the­re are other likely are­as of government inter­ven­ti­on that will hin­der a return to nor­mal. One will be a reluc­tance to relax the new rules. Just as the pilot doesn’t turn off the “fas­ten seat­belt” sign until the tur­bu­lence is long gone, we can expect the strict rules on social distancing and tra­vel to endu­re for mon­ths or even years after the dan­ger has passed.There are also signs of governments using the pan­de­mic as a win­dow of oppor­tu­ni­ty, to bring in new regu­la­ti­ons that might have other­wi­se encoun­te­red resis­tance. Cities such as Paris and Madrid have built new cycle rou­tes, Athens is car­ving out new public spaces whe­re cars used to flow.  The dra­ma­tic reduc­tion in ener­gy usa­ge during the pan­de­mic has embol­den­ed the EU, among others, to set ambi­tious tar­gets for emis­si­on reductions.We might also see new poli­cy inter­ven­ti­ons in some sec­tors. The com­pe­ti­ti­on aut­ho­ri­ties were cir­cling Goog­le, Face­book, Ama­zon and Apple even befo­re the pan­de­mic put them in more domi­nant posi­ti­ons. The pres­su­re for poli­cy acti­vism will incre­a­se, espe­cial­ly in Euro­pe.  Digi­tal ser­vices taxes and anti-trust cases are on the way.Practical tips:
    • Be pre­pa­red for restric­tions on move­ment to stay in place for a long time to come. Even when we as indi­vi­du­als are hap­py to ming­le in crowds and tra­vel again, governments and lar­ge com­pa­nies will always err on the side of caution.
    • Be proac­ti­ve about rethin­king your phy­si­cal foot­print. The bene­fits of having your offices in a lar­ge city cent­re are fewer than they used to be, and that will be an endu­ring effect.

Two dif­fe­ren­ces that look likely to stay

So what will the next few years be like?  Basic human natu­re hasn’t chan­ged, so we will revert to most of the acti­vi­ties and beha­viours that kept us busy befo­re the pan­de­mic. But with two important differences. 

First, the­re will be more cons­traints on how we live. After 9/11 we flew just as much as befo­re, but secu­ri­ty was stric­ter. After the SARS epi­de­mic, peop­le in Asi­an coun­tries beca­me accus­to­med to mask-wea­ring and more health-checks. After the glo­bal finan­cial cri­sis, banks quick­ly got back into their groo­ve, but with vast­ly more regu­la­ti­ons and government over­sight.  We don’t know exact­ly how this will play out, but we can expect grea­ter government invol­ve­ment in our day-to-day lives than before.

Second, the digi­tal revo­lu­ti­on just got a tur­bo boost. Any resis­tance to chan­ge dis­sol­ved in a few short weeks back in March, and the poten­ti­al bene­fits of doing things digi­tal­ly beca­me appa­rent.  And the­se chan­ges will stay with us.  The initi­al effect will be a myri­ad of small adjus­t­ments to our dai­ly lives –shop­ping, paying, lear­ning, inter­ac­ting – whe­re we shift to digi­tal by default.  But the­re will also be a knock-on effect on cities, air­lines, and hos­pi­ta­li­ty ser­vices, as they adjust to the con­se­quen­ces of workers spen­ding more time in their home offices.

When times are tough, it’s only natu­ral to wish for a return to nor­ma­li­ty. But we live in a com­plex and inter­de­pen­dent world, so not­hing is ever qui­te the same as befo­re, even after the storm has pas­sed. What exact­ly the new nor­mal will look like is uncer­tain, but the con­cept of hys­te­re­sis at least gives us a way for­ward. It tells us that some of the chan­ges we have had to make are actual­ly bene­fi­cial, and should not be reversed. 

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