– Amit Nath
Practically every major disruption the navigated by the human race has resulted in significant changes to the way we live our lives, interact with each other and perceive risk. Some of the recent high impact or “black swan” events that are likely fresh in people’s minds, include the September 11th terrorist attacks and the 2008 global financial crisis. Both of these major disruptions reshaped society in lasting ways, from how we travel, the level of security we are subjected to and even our vernacular underwent modifications.
While we are in the middle of the most recent “black swan”, namely the global pandemic caused by the coronavirus, the team at Montaka Global are already thinking through what the long-term implications and lasting changes of this crisis could be. It is likely the crisis will have long-term ramifications for businesses, industries and how the investing environment evolves. While far from an exhaustive list, some of our thoughts are summarized below:
- People have rapidly adopted a heightened awareness of the potential danger of touching surfaces, being too close to other people and breathing the air in an enclosed space (e.g. movie theaters, aircraft, cruise ships, etc). How quickly this awareness recedes (i.e. social distancing) will vary person-by-person, however it is unlikely to completely vanish for anyone living through 2020. People are less likely to be accepting of environments and businesses that do not modify their practices to account for this, and may suffer long-term decline or never fully recover from the immediate term-shocks of the global shut-downs.
- For the past several years, people in the advanced world have spent more money on meals prepared outside of their homes than buying ingredients in order to prepare meals at home. Now however, given restaurants are largely closed and as isolation increases, many people will learn or re-learn how to cook and prepare meals for themselves. Alternately, food delivery options may surge, however given the mass layoffs that are underway and the recession that lies ahead, the former is likely to see a more significant benefit as it is more cost effective. Either way, people are probably going to reduce the frequency of their sit-down dining experiences relative to the past, which may result in significantly fewer restaurants as society becomes less communal at least for a while.
- The world has been in the midst of a secular shift online for quite some time, the coronavirus will likely accelerate this move and break-down some of the last remaining barriers. While not everything can become virtual, in many areas of our lives, uptake on useful online tools has been slowed by legacy players in collaboration with overcautious bureaucrats. More regulated industries such as healthcare, legal, banking and government processes which previously required a physical interaction, are already rapidly morphing online in just a few short weeks. This will likely snowball long after the crisis ends.
- We may see renewed faith in the role of the government, with the coronavirus providing global evidence that a functioning government is crucial for a healthy society. Alternately, if the measures taken by governments to shutdown the economy result in a long-term degradation of living standards, there may be a backlash and more instability in society.
While the long-term, societal impact of the coronavirus remains unknowable, rest assured the team at Montaka Global is tirelessly implementing our bottoms-up, fundamental, value investing framework to look into future and probabilistically assess the risks and opportunities (long and short) that are being presented by the market today.
Amit Nath is a Senior Research Analyst with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.