Why the World Will Stretch After the Pandemic
The world shrank after 9/11 and the Great Recession. This will be different.
Posted Apr 27, 2020
"The world will look different... We're now going to be moving to a self-sufficient world." —Ray Dalio
Every disruptive event causes large-scale change that unfolds over many years or even decades afterward. When a disruption is as unexpected, prolonged, widespread, and severe as the COVID-19 pandemic is turning out to be, it has the potential to cause extraordinary change. Through our individual experiences, and the way we respond now and later on, psychological factors will play a big role.
Additionally, existing social, technological, political, and economic variables all combine with psychology to produce change. In this sense, we can say that disruptive events catalyze change, accelerating it and pushing it in one direction, where before it could have gone in one of many different ways. To understand this, and to predict the change that the pandemic will bring, consider what happened after the 9/11 terrorist attacks and the Great Recession of 2008.
The 9/11 terrorist attacks
The terrorist attacks of September 11, 2001, had profound psychological effects on Americans. Nearly half of all Americans reported symptoms of post-traumatic stress with long-term effects. Feelings of fear for one's safety, heightened vulnerability, anger, and political and religious intolerance were common reactions. Another common response was a stirring of patriotism and the impulse to remain close to family and connect with others, even strangers. At the time, technology was already moving in the direction of facilitating synchronous online interactions between people.
The 9/11 terrorist attacks accelerated and amplified this shift, spurring on the popularity of social networking sites like Friendster, Myspace, and, ultimately, Facebook. The founder of social networking site Meetup, Scott Heiferman, even attributed his volunteering experiences at Ground Zero for the inspiration to start the social networking site:
"I never thought I was interested in community. But that experience led me to the basic questions of 'What brings people together? What gets them to talk to each other? How do people form powerful groups that can do good things?'"
The widespread adoption of social networks changed our norms about such basic psychological phenomena as friendship, self-disclosure, privacy, and buying behavior. We became comfortable transacting with complete strangers halfway across the world and sharing pictures of where we live, who we spend time with, and where we go. As our social networks grew, the world shrank for us.
The Great Recession
The Great Recession of 2008 was primarily an economic event, but it had significant psychological and social ramifications. The years-long economic suffering that followed, particularly for millennials, led many to question the very concepts of ownership and possession. After the recession, even when economic prospects improved, far fewer millennials opted for homeownership. Even vehicle ownership declined considerably. The mantra became, "Spend less money on things and more on experiences."
To free up cash for experiences, many people became comfortable not only renting and sharing apartments and cars but also clothes, tools, workspace, pets, and virtually everything else. This comfort with non-ownership set the stage for the rapid growth of shared or so-called collaborative consumption. Alongside this, movements like FIRE (Financial Retirement, Retire Early) and minimalism advocated de-emphasizing spending and consumption. The result of all these post-recession trends was the growth of ride-share companies like Uber and Lyft, peer-to-peer lending companies like Prosper, and lodging-share companies like Airbnb, among others. As we felt comfortable with the collaborative consumption of different products and services and placed greater value on experiences over goods, our world shrank even more, bringing people closer and forming connections spanning the globe.
The COVID-19 Pandemic
This time around, all trends point to large-scale change in the reverse direction, from the global to the local, from the world shrinking to the world stretching. Just two months into the disruption, the COVID-19 pandemic has already wrought an irreversible change. Social distancing and self-quarantining have imposed boundaries on our schedules and lifestyles, confined us physically and psychologically, narrowing our outlooks. Irregular and atypical buying patterns and the curtailing of cross-boundary transportation has hindered the complex international supply chains. People see the value of locally produced goods, including food and services. The pandemic's bywords are self-sufficiency, vigilance, and individual social responsibility. These psychological processes will be the catalyst for the next round of large-scale change.
Other significant trends, such as the increasingly visible effects of climate change, the adoption of artificial intelligence in predicting people's behaviors, and the growth of the global population, all also have the potential to affect the change wrought by the pandemic.
As the seriousness of the pandemic wanes over the next year or two, many of us will change our buying behaviors to support local enterprises, whether it is farms, mom-and-pop restaurants, or manufacturers. Large corporations that produce high-tech products, cutting-edge drugs, or provide standardized services will be tolerated, but they won't gain consumers' trust or loyalty easily. Foreign goods and brands will be treated with suspicion and be viewed as second choices in many categories, to be considered only when nothing local is available.
International tourism and even travel for business will take a long time to recover. Instead, consumers will choose to buy more local and regional experiences. Just like Uber and Airbnb succeeded after the Great Recession, innovative business models that capitalize on these trends and execute well will become the next group of unicorn startups. Obviously, this large-scale change has major implications for policymaking on issues such as immigration, health care, taxation and tariffs, social security, and employment. On all of these issues, nationalistic tendencies will dominate. Until the next disruption materializes to shake things up again, the post-COVID-19 world will be a much larger and more insular place than the one to which we have grown accustomed.