By Ross Douglas, Founder & CEO of Autonomy & the Urban Mobility Company
In this new monthly column, I share what I’m reading and how it influences our decisions at Autonomy & the Urban Mobility Company.
In trying to understand what the world will look like after we emerge from the COVID-19 crisis, I recently read Slowdown: The End of the Great Acceleration by Danny Dorling, an Oxford University Geography Professor.
Slowdown makes the counterintuitive argument that the pace of disruptive change is decreasing and that the decade of the 1930s was the greatest age of innovation. Using endless amounts of data and impressive graphs, Dorling demonstrates that growth across innovation, fertility rates, housing prices, credit, population and even books published in the Netherlands is slowing down. A pity that carbon emission rates – Covid aside – are also not slowing down.
According to Dorling, a slowdown is the only way to sustain life on earth: we cannot have infinite economic growth on a finite planet. He writes convincingly on demographics and population but when it comes to finance and economics, he simplistically blames the rich for the evil of indebted households and indebted nations.
However, the useful thing about a book with strong statistics is that you can draw your own conclusions. Thanks to Dorling’s rich data, we can predict what the world might look like when we get through this dreadful pandemic.
There will be more debt
Dorling digs deep into American student, car and home loan debt. The numbers are staggering: before the crisis student loans totalled $1.56 trillion, car loans $1.3 trillion and home loans $9 trillion. In this recent FT article, the OECD estimates that rich countries will take on $17tn of extra public debt to fight the consequences of the pandemic, raising their public debt burdens (as a percentage) to around that of Italy before the virus struck.
There will be less jobs
America’s unemployment rate is approaching 40 million – the worst it’s been since 1936. If this is not painful enough, the Becker Friedman Institute of the University of Chicago reports that “42 percent of recent layoffs will result in permanent job loss.” (BFI report)
Europe has so far postponed the pain with its system of Furlough or Chomage Partiel. But a recent Mckinsey study predicts that “Unemployment in Europe could nearly double in the coming months, with up to 59 million jobs at risk from permanent cutbacks. The study further states that 14.6 million jobs in the wholesale and retail sector, 8.4 million jobs in accommodation and food and 1.7 million in arts and entertainment could be threatened.
Virtual will erode the physical even quicker
Dorling is sceptical about AI and believes innovation has slowed since the 1930s. He offers the example of flight: the Wright brothers first took off in 1903 and it only took another 60 odd years until the era of mass air travel, symbolised by the launch of the iconic Boeing 737 in 1967. It has been an amazing century for mechanical innovation. But I think Dorling underestimates the power of technology to disrupt industries, which is accelerating with the current crisis. Just because I use my TV screen in much the same way my parents did, does not mean that the businesses behind the broadcast operate in the same way.
The Great Reset
‘Frugal’ will be the mantra as households and businesses reset their activities to reduce costs. Gucci this week declared the fashion calendar obsolete and slashed the number of fashion shows it participates in from five to two. Others will follow, impacting the cities that host these mega events.
Slowdown offers a counter-narrative to the prevailing ‘growth cures all ills’. The developed economies are taking on massive debt and hoping that their aging populations can somehow pay it back. If debt is used to kickstart the ‘old economy’, further increasing carbon emissions and warming, then we’re only digging a deeper hole. With cheap credit and good marketing we have created the consumer dream: two-car-family, a house twice the size of our childhood one, and endless international travel. What to do with mountains of unsold and unused cars, airplanes and ‘investment homes’? Our old economy may not be obsolete just yet, but – like those unused cars and apartments – it’s in serious need of repurposing.