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How the coronavirus crisis could change society

26032020_COVID-19 Impacts

How the coronavirus crisis could change society

Practically every major disruption or “black swan” event navigated by the human race has resulted in significant changes to society; the coronavirus will be no different. We present some potential long-term implications of this crisis which are likely to have ramifications for businesses, industries and the evolution of the investing environment for many, many years.

Some of the recent high impact or “black swan” events that are likely fresh in people’s minds, include the September 11 terrorist attacks and the 2008 global financial crisis. Both of these major disruptions reshaped society in lasting ways, from how we travel, the level of security we are subjected to and even our vernacular underwent modifications.

While we are in the middle of the most recent “black swan”, namely the global pandemic caused by the coronavirus, the team at Montaka Global are already thinking through what the long-term implications and lasting changes of this crisis could be. It is likely the crisis will have long-term ramifications for businesses, industries and how the investing environment evolves. While far from an exhaustive list, some of our thoughts are summarised below:

  • People have rapidly adopted a heightened awareness of the potential danger of touching surfaces, being too close to other people and breathing the air in an enclosed space (e.g. movie theaters, aircraft, cruise ships, etc). How quickly this awareness recedes (i.e. social distancing) will vary person-by-person, however it is unlikely to completely vanish for anyone living through 2020. People are less likely to be accepting of environments and businesses that do not modify their practices to account for this, and may suffer long-term decline or never fully recover from the immediate term-shocks of the global shut-downs.
  • For the past several years, people in the advanced world have spent more money on meals prepared outside of their homes than buying ingredients in order to prepare meals at home. Now however, given restaurants are largely closed and as isolation increases, many people will learn or re-learn how to cook and prepare meals for themselves. Alternately, food delivery options may surge, however given the mass layoffs that are underway and the recession that lies ahead, the former is likely to see a more significant benefit as it is more cost effective. Either way, people are probably going to reduce the frequency of their sit-down dining experiences relative to the past, which may result in significantly fewer restaurants as society becomes less communal at least for a while.
  • The world has been in the midst of a secular shift online for quite some time, the coronavirus will likely accelerate this move and break-down some of the last remaining barriers. While not everything can become virtual, in many areas of our lives, uptake on useful online tools has been slowed by legacy players in collaboration with overcautious bureaucrats. More regulated industries such as healthcare, legal, banking and government processes which previously required a physical interaction, are already rapidly morphing online in just a few short weeks. This will likely snowball long after the crisis ends.
  • We may see renewed faith in the role of the government, with the coronavirus providing global evidence that a functioning government is crucial for a healthy society. Alternately, if the measures taken by governments to shut down the economy result in a long-term degradation of living standards, there may be a backlash and more instability in society.

While the long-term, societal impact of the coronavirus remains unknowable, rest assured the team at Montaka Global is tirelessly implementing our bottoms-up, fundamental, value investing framework to look into future and probabilistically assess the risks and opportunities (long and short) that are being presented by the market today.

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Amit joined MGIM in April 2018 as a Senior Research Analyst after spending seven years as a credit analyst at Credit Agricole and Citigroup, based in New York. Prior to this, Amit was an investment banker with Citigroup for five years in New York and Sydney, focusing on Media and Telecoms; Metals and Mining; and Consumer Products.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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3 Comments

  1. Charlie Vince
    :

    Human’s adapt temporarily but always revert to the ‘mean’.

    A few will change their ways but the masses (think toilet paper hoarders) will always bring us back to where we belong!

  2. Interesting topic Amit

    Couple of things

    This pandemic is a black swan but it is one substantial event taking place in a series of other crises – Chernobyl, September 11, Fukushima, GFC and so on. What it sum generates a sense of fear among populations that modernization is generating new problems – new senses of risk and new ideas about impurity and blame – new moralities and new ways of socially organizing. It is interesting to compare these events and ask the question what crises lead to a more functional or less functional society – to persons have a rational trust in their institutions and authorities or a faith based trust or mistrust .

    ‘We may see renewed faith in the role of the government’ – ‘faith’ in government is implicated in all of the above crises. The real issue is about social democracy, will institutions become more socially democratic or not – will people/labor be able to voice their objections or concerns, will they be informed by honest authorities, will the public be able to accept the world is messy and imperfect and be able to trust that in ‘experts’ don’t overreach their mandates.

  3. I have been internet banking for 20 years, restaurants were closing anyway, or changing their model, a burger chain last year in Melbourne went from 80% sit in customers to 15% because of delivered meals competition and now has no sit in customers, just deliveries. There are so called dark kitchens just doing delivered meals;
    https://www.abc.net.au/news/2018-04-13/the-dark-kitchens-of-food-delivery-apps/9642460

    You say “rapidly adopted a heightened awareness of the potential danger of touching surfaces, being too close to other people and breathing the air in an enclosed space (e.g. movie theaters, aircraft, cruise ships, etc)
    yet the government and CEO’s have a different view – CEO of Virgin refused to hand over a passenger list after one was found to be positive with the virus – deeming it as “low risk” and the government has said on many occasions that flights are “low risk” to covid-19, which I find
    very surprising.
    One thing that may change, although I am sceptical as history shows we have short memories, you only have to look at the share market, – and that is online learning capability – making it easier for schools and universities, to provide schooling at home very quickly on a grand scale, webinars of lessons for example.

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