Step Changes

“There are decades where nothing happens, and weeks where decades happen” - Vladimir Lenin

Most of life appears on the surface to be a continuous, flowing experience. Children move from one grade to the next. Jobs are given; companies are created; money is lent, spent, and recycled.  People work, move, create, consume, and occasionally clash.

But once every quarter century or so, there tends to be an exogenous event that removes the illusion of fluidity and stability in life and reveals the ruggedness of reality. A world war, an oil shock, a terrorist attack, a deadly pandemic. These represent the rare step changes in life that are nearly impossible to predict with any hint of accuracy. We live in a world that is as fragile as the illusions we keep and preach.

When these step changes occur, we must begin to question assumptions of daily life and ask 'what next?' What happens after our government prints trillions in (necessary) stimulus money? What happens after our economy opens up for business again? What happens to the trillions in corporate debt sitting on balance sheets that isn't being paid? How fast can we put people back to work again?

Economic data, like a heartbeat, has a certain rhythm to it. But occasionally, hearts stop. Bringing a lifeless body back from the brink often brings with it other unforeseen consequences both positive and negative. 

As we attempt to understand the effects of COVID-19 on business, government, and life in general, we'd like to highlight a piece by Tyler Cowen titled 'World 2.0' that raises interesting questions about what kind of step changes we could potentially experience in a post-COVID-19 world. Adding to these thoughts, we are also asking these questions:

- Unemployment - how long will it take to reach full employment again? V, L, U, or square root shaped recovery?

- Physical to Digital work - will we return to fully in-person work as if COVID-19 never occurred?

- Education - will students return to fully in-person classes in higher education at the same sticker price as if COVID-19 never occurred?

- Healthcare - is this telemedicine's moment?

- Real Estate - will residential real estate begin quoting beds, baths, and home offices? Will retail come back as strong as pre-COVID-19? 

- Food - will people go out to eat as much? Will cooking in be the new way that family supply chains adapt to a post-COVID-19 world?

- Manufacturing - will people be willing to pay a premium for guaranteed delivery vs. just-in-time delivery or low-cost internationally-produced goods?

- Supply Chain and Logistics - will the increased demand for home delivery of goods continue post-COVID-19 or will it moderate?

- Technology - how does the 'break up big tech' movement continue after Amazon works overtime to deliver necessary goods to millions of American households, and Google and Microsoft enable millions to work from home?

- Sports - are they losing their sheen and status in the public eye? What do we make of the esports revolution that has now taken center stage? 

- Government - how will this shape global and domestic elections (we haven't forgotten that it's also an election year!)?

- Insurance - what forms of new insurance will be produced coming out of the viral outbreak? How will insurance companies navigate their current claims and financial loads?

- Media - does COVID-19 strengthen media institutions' brands or hasten the the decline of Main Street's trust?

- Transportation - will oil and gas markets see a return to pre-COVID-19 demand? 

If you have a particular insight into one of these industries, we'd love to hear what you are seeing on the ground. And as always, if we can be helpful to your business at this time with capital or navigating the mire that is COVID-19, please reach out. Step changes are inevitable in life, but our response remains our choice. Ours will be to dig in and settle in to the new reality before us. It indeed is a brave new world. 

Navigating an Economic Crisis: Q&A with Permanent Capital's Emily Holdman (Middlemarket Growth)

+ Our own Emily Holdman spoke with Middlemarketgrowth.org this week about how COVID-19 is impacting the private equity space, dealmaking, and how we are aiming to assist and partner with businesses during these turbulent times.

Restaurant Thamee's struggle to weather the pandemic (Slate.com)

+ "As the U.S. economy staggers under the weight of the coronavirus pandemic and its attendant lockdowns, the hospitality sector is hemorrhaging jobs and revenue. Thousands of restaurants around the country have shuttered or curtailed operations under orders from state and local officials. In a recent survey of 5,000 restaurant operators, the National Restaurant Association found that 44 percent had temporarily closed their businesses, 3 percent had permanently closed, and 11 percent projected that they’d have to close for good within the next month. The association estimates that 3 million restaurant workers were laid off in the first three weeks of March—about one-fifth of the entire U.S. restaurant workforce."

The Federal Reserve is stepping in to buy junk bonds and lend to states amid the COVID-19 crisis (Bloomberg)

+ "The Fed said Thursday it will invest up to $2.3 trillion in loans to aid small and mid-sized businesses and state and local governments as well as fund the purchases of some types of high-yield bonds, collateralized loan obligations and commercial mortgage-backed securities."

The National Multifamily Housing Council reports that 69% of renters have paid rent in April vs. April 2019 collections (NMHC)

+ "The National Multifamily Housing Council (NMHC) found a 12-percentage point decrease in the share of apartment households that paid rent through April 5, in the first review of the effect of the COVID-19 outbreak on rent payments. The Tracker found 69 percent of households had paid their rent by April 5; this compares to 81 percent that had paid by March 5, 2020, and 82 percent that had paid by the same time last year."

Google Search's Twitter thread on FAQ for business listings and advertisements on Google's search engine (Google)

+ This will be useful for those with business listings on Google and need to make changes to hours or policies visible to the public. 

The Hollywood agents signing all of the new age influencers (New York Times)

+ Young consumers are more likely to look to YouTube and TikTok stars for inspiration than they are to traditional media: “The next wave of talent, all future waves of talent, aren’t going to come from traditional places,” said Jad Dayeh, co-head of digital at WME. “The younger generation creates, self-broadcasts and shares it with the world. They don’t wait to get their audition shot and wait for someone to discover them.” “It used to be, I want to get famous on YouTube or Vine, so I can have a career in traditional entertainment. Now, this is a career,” said Greg Goodfried, co-head of digital talent at United Talent Agency."

The Founder's Field Guide for navigating this crisis — advice from recession-era leaders, investors and CEOs currently at the helm (First Round Review)

+ This is an 8 part guide to managing during the COVID-19 crisis including topics ranging from cutting costs to raising capital to supporting your team remotely.

How to keep your team motivated, remotely (Harvard Business Review)

+ "We also identified three positive motivators that often lead to increased work performance. We believe these are in danger of disappearing in easy-to-miss ways during the current situation. Play, the motive that most boosts performance, could decrease if it continues to becomes harder for people to get things done from home. For example, people may miss the joy of problem-solving with a colleague, or the ease of making a decision when everyone is in one room. Purpose could also decline with team’s decreasing visibility into their impact on clients or colleagues, especially if no one is there to remind them. Lastly, potential could decline if people can’t gain access to colleagues that teach and develop them."

Planning and managing layoffs (Andreessen Horowitz)

+ No business owner ever wants to face a decision on whether or not they must layoff employees to survive, but when faced with such a proposition, you must be prepared. This is a well-developed guide to managing the situation as best as possible with your employees. 

The Maine farmer saving the world’s rarest seeds (Down East)

+ "He has donated specimens from his collection to researchers at the USDA-administered National Plant Germplasm System, sold them to seed companies like Fedco, and distributed them worldwide through print and online platforms, some of which he’s been instrumental in launching. His work, which he calls the Scatterseed Project, has been covered in multiple books and one Emmy-nominated PBS documentary, and it’s earned him something like icon status within the seed-saving subculture. But these days his collection is dwindling. In part for lack of funding and staff, Bonsall hasn’t kept up with the cycle of replanting needed to regenerate new seeds. And he isn’t getting any younger."

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