After the Virus: Sameer Nair, CEO, Applause Entertainment
21 days of total lockdown, with an indefinite extension in sight (a first in my living memory) has us heatedly debating the saving of human lives versus saving the economy. Not that we didn’t already know, but the suddenness of the lockdown again brought into focus the terrible rich-poor divide that exists amongst us; migrant workers stranded on the roads while urban middle & rich classes hunker down in their homes. And yet, many feel that the extreme lockdown, if prolonged, will so severely damage the economy that the result will be catastrophic, in turn hurting the very people we are trying to save.
These are difficult times; I doubt armchair critics anywhere, would want to be in any government’s shoes right now. Every decision is fraught with unpreparedness, unforeseen consequences and a heavy price tag, in loss of life or loss of economic strength or both. There seems to be no upside anywhere.
Pandemics in the past were nature’s way of culling the herd. Europe lost almost a third of its population to the Black Plague, paving the way for a new world order and redistribution of wealth and resources. We may not suffer the same loss of life thanks to brave frontline medics & warriors, modern medical advances, philanthropy and stringent actions – social distancing, testing, tracing and containment - by local governments. But the Corona Virus could significantly alter both the economy and the consumption society we’ve created and lived in for the past 100 years.
Obviously, some industries are hit more than others; oil, aviation, tourism, retail and hospitality are hurting badly; telecom, online commerce and delivery services benefit. Video conferencing is the new normal; Ola, Uber and Air-BnB struggle. The list goes on. For now, most of these are short-term gains and losses.
Media and Entertainment is also a mixed bag. There is cheer about increased television, internet and social media consumption but Film & TV production has stopped, theatres and theme parks are shut. If content production doesn’t resume soon, platforms will run out of new content to show but gaming will grow. Paid physical newspapers have been replaced by free e-papers. Sport events and their telecasts have been cancelled. News channels continue to provide live content but advertising revenues have shrunk; with a lockdown in place and people buying only essentials, sales of most other products and services that use media to advertise have slowed.
Jeff Currie (Goldman Sachs) talking about the prospects for the recovery of the Oil Industry on CNBC, said “When the system starts to normalize, you’re going to end up with a sharp rebound in demand but supply is likely to lag”. As soon as restrictions are lifted, we will immediately want to jump into cars and planes, and zoom off. But for the oil producers and refineries, it will take time to return to full production capacities…factories have to be restarted, labor re-employed. Ditto for a bunch of other industries, from metals to mining to auto to manufacturing to food…demand will be like a sharp V but supply a more gradual slope.
This is optimistic thinking, this sharp rebound in demand. It depends on an early return to normalcy. A continuing lockdown is already seeing value erosion, retrenchments, cost cutting and reimagined business models. But if it extends for 6-12 months, we are talking about seismic changes to economic fundamentals. We live in a global economy that tightly and inextricably binds everyone and everything together. The butterfly effect of people having no jobs and no money to spend will hurt everyone.
A little rewind. There’s more to the ‘China Virus’ than meets the eye. It’s not just about the Chinese penchant with consumption of exotic birds and animals that allowed the virus to mutate and jump from its animal host to a human host. It also has to do with the US, starting in the 70s, outsourcing their pollution and getting cheap stuff for their domestic market by making China the ‘factory of the world’. Then all of us collectively turned a blind eye to human rights violations to continue to feast on the low-cost manufacturing of China. We quickly forgot the SARS epidemic of 2002, and even though we knew about corona viruses in 2010, we chose to look away. The current danger we face is existential. Climate change, global warming and pandemics are real; they are creations of our over-industrialized society that is destroying the Earth. If we don’t stop, nature will stop us. Like how it has done with the Virus. Stopped us in our tracks, even shut our places of worship.
The return to normalcy, if there can be one, is really the Devil’s alternative. One, that the scare of the virus has changed the world forever, that we will never return to our profligate ways, that we will protect the environment, reduce dependence on fossil fuels and embrace the digital world that the lockdown forced upon us. But for that to happen, it will require a painfully long-drawn pandemic, millions of lost lives, a shattered economy, revolutions everywhere, a human rebirthing, really…an unlikely outcome so far. The other, more likely alternative, is continued containment even as we find a cure, with staggered lifting of the lockdown by geography and industry to get the economy chugging again. Richer governments will step in to rescue their own countries, takeover prize assets in failing economies. In a weird karmic way, we hear that Chinese companies are buying up depressed global stocks at bargain prices. Consumer habits will change and fears will linger, but we will limp back into the world.
I also think India-Asia-Africa will recover differently from the First World economies. It comes from being poor, being used to less and just being more resilient. Mass consumer behavior is focused on getting back to regular work and life, earning rather running scared. Lives, and livelihoods, both matter. Globally too, this will soon follow suit; rich or poor, people forget…that’s why history repeats itself. After a while, the memory of this virus will also blur…like the memory of many past horrors have. It’s humankind’s curse, our short memory. It will allow us to return to a ‘new normal’, different yet familiar and possibly, a little better.
But I really hope we don’t completely forget this experience; that we invest more in medicine and education than weaponry, that we focus more on social equality than race & religious divisions, that we protect our planet more than our politics. We may not be as lucky next time.
