MANY are hoping the various quarantine protocols will end soon or wind down and we go back to where we were prior. I don’t think going back to that will happen. Too much has been disrupted globally and in a very substantial manner. We also better get used to a permanently changed environment; globally, regionally and at home. In the same way 9/11 changed travel and security protocols permanently, the post- coronavirus disease 2019 (Covid-19) world will see changes in many more areas. Some abrupt, many evolving, but it will not return to what it was before.
On May 12, the New York Times had an article on how “Manhattan faces a reckoning if working from home becomes the norm.” There were many insights explained in that article; Barclays, JP Morgan and Morgan Stanley alone employ 20,000 people in Manhattan and occupy 10 million square feet of space, equivalent to the whole downtown of Nashville. The various chief executive officers (CEOs) are quoted as stating the idea of 7,000 people in one building may be a thing of the past, that the crisis proved we can operate without a footprint and that they now have a better idea of where people need to be physically. What are some of the effects of that? Less office space is obvious, that will mean lower real estate prices, which means lower real estate taxes (one-third of New York City’s tax revenues). So, how do you pay for the same level of police, teachers and so on? Then if you only need to come into the office for meetings, say, weekly, hot desks, which are common in the tech industry, which means no set desk or office, just bring out your stored office material and go to the office space assigned to you for the day becomes natural.
With that, do you really need to live in expensive Manhattan or even NYC or nearby? Would you prefer living much better and cheaply with more space 50 miles away if you just had to come in once a week or so? Then how do public schools which are funded from real estate taxes get funded? Where do they need to be if the population is more diffused? What about restaurants and the like? How will they adapt to less concentration of clientele? Those issues and choices will be repeated everywhere, including here.
Travel and tourism
That is just office and real estate. Let’s go for a real obvious one, travel. Prior to the lockdown there were about 10 flights a day from Manila to Hong Kong. Today there is one flight operating three times a week. All assume there will be more flights when travel is allowed again, but 10 times a day? Now, go to less highly traveled options like Manila to Bangkok. Four to five flights a day prior to Covid, some business but mostly leisure travelers would be my guess? Today, no flights. When allowed again, don’t think it is going back to five. Now what does that mean for short-term travel and connecting flights? Good luck. What about where and how one will fly? In the 1990s one of my best friends at Wharton who was based in Dublin was CEO of a mining company with projects in Mozambique and Angola. Pre-Covid, you could fly between the two places. In the 1990s, he had to fly from London to Africa back to London then to the other African country as there was literally no demand for flights between the two African countries. Might not be as bad as that post-Covid, but not the same. So, what happens to staffing in the industry?
Becoming a pilot was a growth industry with airlines poaching. Not anymore.
Tourism? Some will come back, but cruise ships? Would you go? Majority of the crew are Filipinos. Many will come home with their contracts canceled. If they trained as a sailor, will that be the equivalent of being a Betamax repairman today for many of them? Thousands of seamen, cooks and hospitality workers in that industry are from the Philippines. Perhaps some of the sailors will find a way back eventually to the industry, but if a whole sector of the global tourism industry like cruise ships goes from mainstream to niche, most of those jobs are gone for good. It is estimated every overseas Filipino worker supports five people. Quantify the multiplier effect and factor the capacity of those displaced to find a new skill and employment. For destination tourism like resorts, how many tourists will go and even those who want to, will accessibility be good enough to make it worth the time and effort? That was already a challenge in the Philippines compared to, say, Thailand.
Health care
Health care? One of my best friends who is a year older than I — and I am 6 — specialized in infectious diseases and is very highly regarded in his field, even serving on the World Health Organization (WHO) council on infectious diseases for over a decade. When he chose that in the 1980s, we all said “What?” followed by “Why?” Well, turned out he sincerely had a passion for it. Now that expertise is highly demanded. Health care will be more critical but not in the previous ways. Hopefully, there will be heightened respect for science and medicine.
Being a local stockbroker in 1997 was very lucrative and I saw lots of young brokers then smoking Cuban cigars and drinking single malts only. Then came the Asian crisis. There will still be some brokers after that and some came back but never to 1997 levels and definitely only a fraction of the foreign brokers who closed came back even over 20 years later, partly because many of them closed shop themselves or dropped their regional ambitions and just went back to their home country or only the biggest markets. Want context? Pre-1997, daily volume at the exchange, if I recall correctly, was over $100 million. Before the market reopened with SM Investment Corp.’s initial public offering in March 2005, daily volume was about $5 million. By 2007, it may have gotten back to 1997 levels. So, it took a decade to get back to what it was. That is what happens when the industry or trade one is specialized in has a sea change in outlook. I know many stockbrokers who had to abandon that line of work for something less lucrative. I know one who was a senior broker at an international firm who became a nurse. Another a freight forwarder. Sometimes what goes away does not come back or comes back at a permanently reduced level than before.
Tech
Then, tech, clearly a hot sector if you are in the right sub sector. I am on the board of a software-as-a-service company in the United States that concentrates on enterprise companies globally. It concentrates on cloud migration and management and data integration and management. Their business is doing well and many global companies that said it was a priority, now say it is an imperative so revenues and new business is up. But in the sectors that are struggling like retail and travel, their clients want to migrate further but have said let’s put it on hold as we have to preserve cash. Still, what has been happening in the cloud? Many are going for a hybrid solution. They maintain on premises data management but are increasingly going cloud for major enterprises; but the smaller entities are going nearly all cloud as the economics and reliability are compelling. Also, work from home is for leading companies not the future but now, and not just conference calls or even just VPN or Zoom video calls. I don’t want to be acting like someone advertising various products and clients, so let’s just say those offering or customizing high-level remote office tools are doing very well globally. Adoption of that is part of why those financial services CEOs in New York made those statements. My sons work for Wells Fargo in New York and Google in Singapore. Even before Covid, the ability to work remotely was in place and often resorted to. It is no longer an option or even a necessity but an imperative if you are not yet there. A tech company in the Philippines that works on data management and integration is seeing business during this crisis boom because a lot of large companies were forced to ramp up remote work capabilities, and because they had put that in place for themselves prior, could execute during the quarantine.
Retail
Retail, are we going online for everything? Like the cloud, it will be a hybrid future. Yes, people will still want to go to physical stores when they can for some types of items but the higher acceptance for online shopping and the resulting logistics required for that type of fulfillment is clear. When I saw the Grab logo late last year, it would mostly be on cars. Now I see it ubiquitously on delivery motorcycles. Later we will see it on both. Same with their competitors. Those that have delivery businesses are doing very well.
I don’t mean this list to be exhaustive but merely illustrative of my thesis. I hope I have illustrated the permanence and scope of the change that this crisis catalyzed globally.
I reread Camus’ The Plague during the quarantine and am happy I did. One of the themes was the plague is not defeated, it is merely subdued. It also described the feeling when the gates were opened and returnees came back when the plague was declared over. It was a moving description of how so many sought to recover what came before, not realizing it was gone and that we all had changed as a result. This was whether it was someone who was stuck at the quarantined place or a loved one returning. To end with another literary quote from Lewis Carroll’s Through the Looking Glass — you don’t know how much running I have to do to stay in the same place.
Stephen CuUnjieng is chairman and CEO for Asia of a New York Stock Exchange-listed investment bank and has been in that industry since 1986.
