Hi All,

Lots of things have happened over the past week. School started, which means life will eventually get back to a normalized schedule – but for how long? It means less travel, less vacation time and back to work on-premises for some, while others keep working from home. That’s leading governments and corporations to think about the future of the workforce. The news cycle keeps spinning, with the market in flux and central banks committed to lower rates, which leads to some fantastic conversations with you.

Let’s talk about the future of work and the economy

I finally had some real time to think about “stuff” over the past two weeks. I came across an article about economies in flux, in transition, changing from one form to another, and the upheaval, uncertainty and chaos that can create, not just economically, but also culturally and socially. Shockingly, it is all linked, and we are living in it right now!

Alright then, please elaborate

The term is “creative destruction.”

That takes me back to Economics class, but I wasn’t really listening back then. What is creative destruction?

To borrow from an old textbook, creative destruction is “the process of industrial mutation that continuously revolutionizes the economic structure from within, relentlessly destroying the old one, relentlessly creating a new one.” - Karl Marx

…and in English?

Out of pain comes gain. Through the changes inflicted on an economy – lost jobs, ruined companies, changing industries – new jobs, new companies and new industries emerge, with the result that collectively, people experience new and “better” products that make life more efficient, they earn more and they have a better standard of living.

Sounds a bit idealistic…

Well, it’s no fun living through it, which many people are right now. Unemployment could run as high as 9–10% for some time as the economy sorts itself out. Civil unrest, social isolation… how many of us didn’t think we could work from home, and now we do? How many of us didn’t think we’d buy groceries online, but now we do? How many of us didn’t think gas cars would ever be replaced by electric or hydrogen-powered vehicles? How many of us thought we would readily get rid of cash? And now we have.

All these things will have a massive impact on our lives, on businesses and on the economy. The trends were already there, but then COVID-19 pushed those timetables up a few years. Will they trend back? It’s doubtful.

Amazon is hiring over 100,000 people for its operations in North America. This is the fourth time in the past year alone that Amazon has done this. Yet these jobs will be offset by more layoffs and bankruptcies in the hospitality, food service and retail sectors. Yet as more and more “on-shoring” happens, more jobs will be created. But they’ll be different jobs.

Working from home has given corporations the ability to view employee productivity and output: who micromanages, who doesn’t know how to run a business unit, who can adapt to new routines and situations. There weren’t many white-collar layoffs in the first part of the COVID-19 pandemic, but they will happen sooner or later. This in turn will spur the activation of more entrepreneurs and consultants, which in turn will lead to more innovation.

OK, I get it, but won’t it be messy?

No doubt the transition will be messy. The market will get ahead of itself, run up quickly (through option manipulation or media hype) and then come back down to a more reasonable level. And then rise again.

Market drops are always felt harder than market tops because they are sharper and more climactic and the latter are more gradual.

So what do I do?

Be patient. Call me if you are worried. Review your financial plan to see that it’s still in order. Review your objectives, risk parameters and time horizons to make sure they’re still in order. Call me to discuss what’s on your mind.

This fall, we should be prepared for the possibility of varied economic growth and, more than likely, more COVID-19 outbreaks and maybe more lockdowns. But that doesn’t mean we need to turtle and focus on the bad news only. We need to remember what our time horizons are and that this period of creative destruction is going to create new opportunities. We should focus on the long term and on the innovation that will emerge. As much as things change, the focus on sound investment principles stays the same, and those principles will serve us well for the markets of today – and tomorrow.

Call me to discuss.

Thanks

Christian