What’s Next…? Second Order Consequences of Covid-19

There are a few rather profound second order consequences of the Covid-19 pandemic. By second order, we mean not readily visible, or in your face, or what the press and talking heads are going on about.

Let’s look at 3 examples of second order consequences:

Government Intervention

The state-owned enterprises (SOEs) in China’s war against Covid-19 rapidly deployed efforts to flatten its curve due to close ties and directives between government and enterprise. In Europe, it was much trickier because of the higher degree of private enterprise. But European governments prevailed in getting private companies to comply with restrictions. The U.S. government also achieved compliance, but it cost substantially more money.

In all instances, government policies have now penetrated market systems profoundly. Companies have no-doubt appreciated the $8+ trillion (and growing) in global economic support. But now government is inside private enterprise. The much less obvious second order consequence is that instead of independent businesses, we now have a mutually dependent, interwoven relationship between government and private enterprise. What makes anybody imagine government will leave this cozy relationship…? Does the fox leave the henhouse?

Technology

China and Asia proved highly effective with their social distancing management by using track and trace technologies, which the rest of the world is now finding irresistible. Investment in surveillance tech will probably substantially influence national investment in digital infrastructures, data centers, artificial intelligence, and 5G. Again, industries moving from private investment to federal capital.

Customer Behavior

Understanding that we probably can’t totally eradicate Covid-19, social distancing, or some form of it, will perpetuate working from home, online shopping, digital banking, remote entertainment, tele-health, virtual classrooms, etc.; which in turn will cause greater stimulation of advance logistics, robotics, and automation industry sectors.

These examples demonstrate that when we plan for a post-Covid recovery, we are compelled to look behind the news headlines and popular economic graphs, and seek to not only understand the obvious forces that cause the current phenomena, but even more-so, the longer-term consequences of these triggers.

Our Scenario Planning process goes beyond the obvious, the sensational, and flash of the day. We work to understand the underlying mechanisms and forces to surface second order consequences and more effectively inform your strategy.

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Gideon Malherbe

Gideon Malherbe

Gideon Malherbe is a partner of VCI Ltd, a global strategy design company. Gideon is well known for his development and implementation of unique methodologies and strategic insights that deliver truly extraordinary results to clients. As a visionary, Gideon has orchestrated some of the largest strategy, innovation, and digitization projects in the Mining & Metals and Oil & Gas industries, the results of which have become enduring models worldwide.