First 3 predictions for post-COVID world
I've just published a short paper on the likely future after COVID, and am exploring what the trend spotting and scenario development suggests to me. We need to be spending time understanding the emerging future and preparing for it. I've presented one version of the potential future in my paper, posted on my LinkedIn account. I'll be calling out some implications and predictions based on this paper. Please take some time to download and read the paper, and share it with others if you think it has merit. Contact me to discuss what's in the paper, what you think I got right or where I may have missed the mark.
Over the next week or so I'll be writing short blog posts that examine a handful of the trends and some of the predictions that I made in the longer scenario, to illuminate factors governments and companies should consider as they start thinking about what lies ahead.
The three trends, predictions and implications I'll be addressing in this post are:
Here come the Millennials
As I note in the paper, our presidential election in 2020 will be the last gasp of the Greatest Generation and to a great extent will signal the beginning of the end of leadership by the Boomers. Increasingly, younger generations will take the stage in economic, political and business leadership. The rule of the boomers has been been a short ride, from the 1990s till today, and mostly a sugar high, fueled by a rapidly rising stock market and cheap money, but leaving little behind in terms of infrastructure. The boomers capitalized on what the generations before them built, but I'm concerned they leave little behind for future generations except debt.
Millennials will take the stage, and they have very different motivations and expectations. Remember that the Millennials were leaving college during the 2008-2010 financial recession, so many ended up with jobs and paychecks that were less valuable and less challenging than they may have deserved. Just as they gain real traction in their careers, COVID introduces another setback.
I think their governing style and their management styles will be more generous, more inclusive and more concerned for the triple bottom line than their predecessors, but that remains to be seen. While it is difficult to characterize an entire generation, I think the experiences of the Millennials to date, and their clear energy and passion for change will have a significant impact on the way we live, the way they run businesses and the political systems they encounter. Concepts like the Green New Deal and organizations like the Bernie Bros are examples of how at least some Millennials think about the world.
Why this matters
The older generations - the Greatest, Silent and Boomers - lived in a period when the US was the dominant force in the world. The Boomers rose during the post World War II era and have only known the US as an economic powerhouse. But I think in the eyes of the Millennials, these generations - their grandparents and parents - did not do enough in areas like income and racial inequality, climate change and social safety nets. I think they'll be less likely to project American power overseas, more likely to seek international accord, more likely to increase regulation on businesses at home and more likely to create new social programs. I suspect they'll be less likely to deploy US troops overseas but work harder on international agreements than past administrations.
Have I got a building to sell you
Much of the strength of our economy is in the value of real estate - buildings and land. Heck, even our current president is a real estate developer. But what happens when at least two important legs of the real estate market weaken or collapse?
We are already witnessing the devastation of one leg - retail. Malls and strip centers were already suffering due to the rise of online shopping. Amazon and other online merchants have taken a significant share of retail business and led to the emptying of malls across the US. The COVID pandemic is having its own impact: small businesses and restaurants are closing and many will not re-open. The net result: there will be a lot of retail real estate that is abandoned or sitting empty.
Then, consider the office real estate market. For years, theories about the value of office space and where employees work has zigged (everyone in the office!) and zagged (no - work from home). Just a few years ago, the emphasis was on getting people back into corporate offices. Now, post COVID, many knowledge businesses are sending people home "forever". What happens when many leases for office space end in 2020 and 2021? A glut of empty office space without a lot of demand.
The housing market is the third leg, and remains interesting. Many locations have homes and condos that are simply priced out of reach for the average buyer - look no further than San Francisco, where people with jobs live in RVs on the street. However, in uncertain times people may hesitate to buy homes even where prices are affordable. If mortgage rates stay low, we'll see some development, but even the housing market may suffer in the next year.
Why this matters
Real estate development has a significant "pull through" quality. Beyond the work to build a building, there are taxes and fees, development costs, new furnishings and the economic value that surrounds new buildings. If there is a glut in the retail and office real estate market, there will be a dramatic lack of pull through for other goods beyond construction, and a lot of empty real estate sitting on the books of REITs and other organizations.
This impacts current spending but will also impact the value of the stores and businesses that remain, and will lead to lower tax rates. Every empty building has a knock on effect to other buildings or stores nearby. Property values and income streams may weaken, the tax base may suffer.
All the fine young criminals
The last prediction I'll make has to do with crime. In any generation, there are a certain number of people who may turn to crime. The larger the generation, the larger the number of people who may turn to crime.
The Millennials are a relatively large generation compared to the Xers before them, so that means there are more people in the cohort. In fairness to the Millennials, research shows that to date they've committed less crime than their predecessors. However, the Millennial cohort is the largest cohort of people alive today, and population size and other considerations listed below may lead to more crime.
The exacerbating factor is not the size of the generation, but the conditions in which they will be raised and are currently living. The US has significant issues with inequality, in income and in racial relations. Add to that the dramatic loss of jobs from COVID and a large number of unemployed, possibly disaffected younger people, and you have the makings for a new crime wave.
Why this matters
The problem with this potential crime wave is that it will occur when the trust in police forces around the country is already very low. There are segments of the population that have legitimate concerns about the equity in policing, whether those concerns are based on racial issues or legal status. Any new increase in crime, at a time when the faith and trust in policing is low, could lead to real unrest.
What's the take away?
As the longer research document I've published illustrates, there are many trends unfolding that we can predict, and others we can only make intelligent guesses about. One area that will unfold relatively predictably is demographics. Older generations are certainly leaving the positions of power and new generations, particularly the Millennials, will assume much of the power structure in the coming few years. Understanding who they are, what they want, what they value and the energy and passion they bring to those leadership positions in government and in business is critical to understanding how we'll live and work in the near future.
It's exceptionally likely that the real estate market will take a significant hit as retail and small businesses are slow to recover and large, knowledge-based businesses send people to work from home. What impact does a glut of real estate have on the economy, and what's the impact of lower occupancy and perhaps less building, especially considering the pull through effect of new buildings?
These and other questions are the ones that your teams should be asking. In this post, and in subsequent posts, and in my published scenario, I point out factors I think business and government leaders should be thinking about now, to prepare for an emerging future.
In my next post, I'll consider three more implications and predictions about the emerging future.
Over the next week or so I'll be writing short blog posts that examine a handful of the trends and some of the predictions that I made in the longer scenario, to illuminate factors governments and companies should consider as they start thinking about what lies ahead.
The three trends, predictions and implications I'll be addressing in this post are:
- The rise of the Millennials and what comes next
- The looming real estate bust of 2021-2022
- A potential new crime wave
Here come the Millennials
As I note in the paper, our presidential election in 2020 will be the last gasp of the Greatest Generation and to a great extent will signal the beginning of the end of leadership by the Boomers. Increasingly, younger generations will take the stage in economic, political and business leadership. The rule of the boomers has been been a short ride, from the 1990s till today, and mostly a sugar high, fueled by a rapidly rising stock market and cheap money, but leaving little behind in terms of infrastructure. The boomers capitalized on what the generations before them built, but I'm concerned they leave little behind for future generations except debt.
Millennials will take the stage, and they have very different motivations and expectations. Remember that the Millennials were leaving college during the 2008-2010 financial recession, so many ended up with jobs and paychecks that were less valuable and less challenging than they may have deserved. Just as they gain real traction in their careers, COVID introduces another setback.
I think their governing style and their management styles will be more generous, more inclusive and more concerned for the triple bottom line than their predecessors, but that remains to be seen. While it is difficult to characterize an entire generation, I think the experiences of the Millennials to date, and their clear energy and passion for change will have a significant impact on the way we live, the way they run businesses and the political systems they encounter. Concepts like the Green New Deal and organizations like the Bernie Bros are examples of how at least some Millennials think about the world.
Why this matters
The older generations - the Greatest, Silent and Boomers - lived in a period when the US was the dominant force in the world. The Boomers rose during the post World War II era and have only known the US as an economic powerhouse. But I think in the eyes of the Millennials, these generations - their grandparents and parents - did not do enough in areas like income and racial inequality, climate change and social safety nets. I think they'll be less likely to project American power overseas, more likely to seek international accord, more likely to increase regulation on businesses at home and more likely to create new social programs. I suspect they'll be less likely to deploy US troops overseas but work harder on international agreements than past administrations.
Have I got a building to sell you
Much of the strength of our economy is in the value of real estate - buildings and land. Heck, even our current president is a real estate developer. But what happens when at least two important legs of the real estate market weaken or collapse?
We are already witnessing the devastation of one leg - retail. Malls and strip centers were already suffering due to the rise of online shopping. Amazon and other online merchants have taken a significant share of retail business and led to the emptying of malls across the US. The COVID pandemic is having its own impact: small businesses and restaurants are closing and many will not re-open. The net result: there will be a lot of retail real estate that is abandoned or sitting empty.
Then, consider the office real estate market. For years, theories about the value of office space and where employees work has zigged (everyone in the office!) and zagged (no - work from home). Just a few years ago, the emphasis was on getting people back into corporate offices. Now, post COVID, many knowledge businesses are sending people home "forever". What happens when many leases for office space end in 2020 and 2021? A glut of empty office space without a lot of demand.
The housing market is the third leg, and remains interesting. Many locations have homes and condos that are simply priced out of reach for the average buyer - look no further than San Francisco, where people with jobs live in RVs on the street. However, in uncertain times people may hesitate to buy homes even where prices are affordable. If mortgage rates stay low, we'll see some development, but even the housing market may suffer in the next year.
Why this matters
Real estate development has a significant "pull through" quality. Beyond the work to build a building, there are taxes and fees, development costs, new furnishings and the economic value that surrounds new buildings. If there is a glut in the retail and office real estate market, there will be a dramatic lack of pull through for other goods beyond construction, and a lot of empty real estate sitting on the books of REITs and other organizations.
This impacts current spending but will also impact the value of the stores and businesses that remain, and will lead to lower tax rates. Every empty building has a knock on effect to other buildings or stores nearby. Property values and income streams may weaken, the tax base may suffer.
All the fine young criminals
The last prediction I'll make has to do with crime. In any generation, there are a certain number of people who may turn to crime. The larger the generation, the larger the number of people who may turn to crime.
The Millennials are a relatively large generation compared to the Xers before them, so that means there are more people in the cohort. In fairness to the Millennials, research shows that to date they've committed less crime than their predecessors. However, the Millennial cohort is the largest cohort of people alive today, and population size and other considerations listed below may lead to more crime.
The exacerbating factor is not the size of the generation, but the conditions in which they will be raised and are currently living. The US has significant issues with inequality, in income and in racial relations. Add to that the dramatic loss of jobs from COVID and a large number of unemployed, possibly disaffected younger people, and you have the makings for a new crime wave.
Why this matters
The problem with this potential crime wave is that it will occur when the trust in police forces around the country is already very low. There are segments of the population that have legitimate concerns about the equity in policing, whether those concerns are based on racial issues or legal status. Any new increase in crime, at a time when the faith and trust in policing is low, could lead to real unrest.
What's the take away?
As the longer research document I've published illustrates, there are many trends unfolding that we can predict, and others we can only make intelligent guesses about. One area that will unfold relatively predictably is demographics. Older generations are certainly leaving the positions of power and new generations, particularly the Millennials, will assume much of the power structure in the coming few years. Understanding who they are, what they want, what they value and the energy and passion they bring to those leadership positions in government and in business is critical to understanding how we'll live and work in the near future.
It's exceptionally likely that the real estate market will take a significant hit as retail and small businesses are slow to recover and large, knowledge-based businesses send people to work from home. What impact does a glut of real estate have on the economy, and what's the impact of lower occupancy and perhaps less building, especially considering the pull through effect of new buildings?
These and other questions are the ones that your teams should be asking. In this post, and in subsequent posts, and in my published scenario, I point out factors I think business and government leaders should be thinking about now, to prepare for an emerging future.
In my next post, I'll consider three more implications and predictions about the emerging future.
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