loader image

How Behavior Will Change… According to Economists

The pandemic brought a great deal of change into everyone’s lives, but how much of it is going to stick around? People and companies are resilient, and a look at some of history’s similar episodes like pandemics, plagues, and terrorist attacks shows that people reverted to previous modes of behavior fairly quickly. On the other hand, not all change is bad and sometimes we find better ways of doing things. So, what will fall by the wayside this time, and what will we embrace going forward?

Back to Normal

What I’m looking forward to most is a return to normal for restaurants, bars, and movies – it’ll be nice not to have to wear a mask for a haircut. The consensus is that we will see a return to normal in these areas. What is unknown is whether consumers will have found a better use of their money. There are few who will have a home theater system that equals a movie theater for that summer blockbuster, so people like me will still go to the theaters and see the latest and greatest. Schools will largely go back to the way they were before, and as far as economists are concerned, the sooner the better. One concern that has been raised over and over is that online schooling is not as effective for all students and may hurt human capital over the long run.

Why Didn’t We Do This Sooner

This pandemic has accelerated shifts that had already started, pushing up investment and getting things 3-4 years ahead of the previous schedule. A surprising number of them have turned out to be big hits with individuals and companies alike. Work from home is probably the most visible and wide ranging of these shifts. Multiple firms from McKinsey & Company to Gartner to Mercer have surveyed companies to see what they think is likely to stick around. McKinsey’s results are below.

Source: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever#

The overriding theme here is digitization and increased ability to communicate quickly and effectively along with changes in logistics. We’ll continue moving towards buying things online, working online, shifting phone lines online, all from home (which is why I can’t wait for restaurants to be back to normal). Surprising many businesses, 90% have reported no loss in productivity – in fact about 30% have said productivity increased. Supply chains are going to be more thoroughly diversified, just like your portfolio and for the same reason – if a company loses one supplier, they don’t want to have nothing to sell. Finally, as many contended with when online shopping was at its peak, the U.S. Postal Service, UPS, and FedEx are simply not adequately equipped for a massive shift to online shopping. So further improvements to delivery logistics, especially the last leg to the door, will continue to be worked on to meet the needs brought to the forefront by changing behaviors.

I’m quite excited for many of the changes to stick around. The economy’s productivity growth has been lackluster for quite a while, but now we’ve been forced to figure out better ways to get things. Maybe we’ve pulled ourselves out of the rut – as long as going to restaurants goes back to normal and I can feel comfortable going back to the movies.

Vinay Sharma, CFAⓇ, CIPMⓇ
Senior Portfolio Manager


Share this post

Start making informed financial decisions – partner with a knowledgeable financial advisor.

Join Our Mailing List

Sign-up for regular updates to empower yourself with the knowledge to secure a brighter financial future.

Let's Connect

Follow us on social for regular updates to empower yourself with the knowledge to secure a brighter financial future.