The COVID Revolution

With the great economic freight train of spring 2020 brought to a screeching halt by COVID-19, our usual supply chains buckled, broke, and then fell off the tracks. 

Our normal ways of satisfying our needs disappeared. In the midst of a scramble over the past month, in some ways we went back in time. In other ways, we went forward in time. 

I reacted to shortages at the grocery store by getting in the habit of ordering a dozen eggs weekly through my gym, which has a connection to a local farm. The eggs are very delicious, and very expensive, compared to grocery store-bought eggs. I feel very close to the land!

I admire on social media my friends and relatives home-sewing their custom face masks from old scarves and bandannas. Stylish! Unique! Hand-crafted! It’s all very Etsy.com.

I bought a 5-gallon bucket of hand sanitizer from a friend who converted his whiskey distillery to the task.1

So the question becomes, will the legacy of COVID-19 be a return to a slower pace of economic life, recognizable from a century ago? A life full of locally-sourced eggs, hand-sewn clothing, customized distillery products and of course quality time with a small family unit? Seen from a certain angle, it’s all very Little House on the Prairie. Is that our post-COVID future?

No, that fantasy is silly. That train left the station long ago.

What’s happening instead, and what will remain after, is a jump-start to new ways of doing things. 

In The Structure of Scientific Revolutions philosopher Thomas Kuhn argues that big change comes not as a slow evolutionary process, but rather in sudden paradigm shifts. What we’ve all experienced and observed in the last month of social distancing is a massive jump forward – maybe by many years – into the future of certain economic processes. Below are just a few trends that COVID-19 will rapidly accelerate. COVID-19 causes this paradigm shift, rather than evolutionary change.

The revolution in education

Online learning this month has offered an insight into the future of school and learning. For the first three week of school shutdown, the public elementary school where my fourth grader attends has worked on providing technology to all of her classmates. That technology procurement was necessary because it’s impossible to start online work if kids in the class can’t get connected. So administrators have rushed to acquire and distribute iPads, hotspots, and internet access for families for whom that was previously out of reach financially. 

Before COVID-19, they could never do much with online learning, because too many families would be left outside the digital divide.

Having solved that tech problem over the past three weeks, however, new online learning methods, assignments become both possible and necessary.

With the education world forced to adapt so quickly and so universally, will education ever be the same again? Will universities, for that matter, ever be the same? It feels like COVID-19 has forced a paradigm shift in what’s expected of teachers, schools, and kids. 

The revolution in payments

Apple_1984
From Apple, in 1984

I already used the touchless Apple Pay service before now. But I’ve noticed, to my frustration, that a huge number of retail establishments – like my local grocery store chain – never have the right kiosks to accept payment this way. If we understand that bills and coins are a germ-filled disease vector, and even that exchanging credit cards with a cashier is too much contact, then the contactless Apple Pay represents the future. COVID-19 may mark a sudden paradigm shift away from cash.

Apple, as always, sees the future before the rest of us do.

The revolution in retail.

Did we think Amazon’s deliver-to-the-door business model already threatened brick-and-mortar retail before 2020?

Of course. But the only reasonable observation to make now is that Amazon has accelerated its take-over of retail businesses in America. Much more brick-and-mortar retail will now die, much more quickly, in a step-change paradigm-shift way, not in an evolutionary way.

From the distance of time, let’s say two decades from now, my freight train economy analogy that I began this column with will seem even more quaint, and even more apt. We will look back at spring 2020 – before the COVID-19 transformation – and see the way we did things in 2020 as impossibly inefficient. Impossibly brutal, dumb, loud, linear, and tracked. Like a freight train that can only go from one point to another. So limited.
Our sleek, smart, creative, rocket ship economy of 2040 will have blasted off from 2020, no longer held back, no longer limited, by the rails of a freight-train economy.

Note: This post ran in the San Antonio Express News in April 2020…I’ve just been remiss in posting my stuff on Bankers Anonymous! Forgive me.

Please see related posts

The coming death of brick and mortar (2016 edition)

The War On Cash

A small whiskey distillery near The Alamo that is also a family legacy

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  1. Next request to the distillery: Please hook me up with a 5-gallon bucket of moonshine to tide me over during this period of isolation, as I spend large amounts of indoor quality time with my family.

War on Cash or Privacy

pancakesI started thinking about the War on Cash recently over a giant plate full of butter, syrup, and pancakes.

You see, I spent part of my summer vacation in Gatlinburg, TN, which some think of as the jumping-off point to Great Smoky Mountains National Park, but I prefer to think of as the Pancake House capital of the world.

What microchip manufacturers are to Silicon Valley and M&A banks are to Wall Street, pancakes houses are to Gatlinburg, Tennessee. Swing a dead cat on the main drag and you’ll probably hit a pancake house.

Anyway, my family and I enjoyed a meal at the oldest pancake house in Gatlinburg and lo and behold, they only accept cash.

smoky_mountainsOne of the great benefits of visiting a cash-only pancake restaurant with your children is they might ask “why cash only?” and you might get to explain tax-evasion and money-laundering to your 7 and 12 year-olds. You see, sometimes dear, a nice pancake restaurant likes to under-report its sales, which allows them to under-report profits, which allows them to pay less in federal income tax. Or, sweet child, sometimes bad men with profits from illegal businesses like to “launder” their money by teaming up with a restaurant, which traditionally has a lot of cash transactions. You see, sweet pea, credit cards create a reportable electronic record and therefore less wiggle room to make up however much in legitimate profit a restaurant owner might want. More all-cash transactions means more room to cheat The Man. Pass the syrup when you’re done, love.

I should point out that even as I explained money laundering and tax evasion to my pre-teen children, I have no specific reason to think anything untoward happens at the specific restaurant we visited, only that they provided a nice learning opportunity to go with the meal, because of their unusual cash-only policy. And the pancakes were simply delicious.

Of course, the pendulum between cash-only and cash-less is swinging steadily towards cash-less. Despite the “self-reporting benefits” to a restaurant of an all-cash world, we’re more likely these days to experience cash-less transactions.

airplane
Do you take cash?

I remember just a decade ago one of my smart-ass friends used to facetiously ask at regular stores “Do you accept cash?” just to cause the double-take reaction at the checkout counter. With the swift evolution of technology and ubiquity of plastic and electronic transfers, however, that question becomes less goofy every year.

In fact, around 2009, first airlines and then other stores began refusing cash in favor of plastic, for both convenience and safety. Flight attendants presumably save time and hassle by not fishing around for exact change for our snack boxes and in-flight headphones.

Credit card companies have a clear vested interest in the payments war between cash and credit. Card companies like Visa, MasterCard and American Express charge venders hefty fees to accept cards at the same time that they charge us consumers high rates of interest if we carry a monthly balance.

Earlier this month Visa launched a direct assault on the use of cash, offering some restaurants a $10,000 incentive to go cash-less. The restaurants in this trial only qualify for the $10,000 payment if they refuse to accept cash from customers.

dsA business accepting credit cards pays an average of 2 percent in fees for credit card payments – an expensive proposition – in addition to the loss of “flexibility” with respect to reporting sales. Maybe $10,000 will be enough of an incentive from Visa to overcome these hurdles? Somehow I doubt that would be enough to entice my favorite pancake place in Gatlinburg.

While credit card companies have a clear stake in the move towards a cash-less society, so do governments. In November last year, the government of India instituted a sudden assault on cash transactions, specifically intending to combat tax evasion and money-laundering, by banning the use of “high” denomination bills, which included the 500 rupee and 1,000 rupee bill.

People and businesses who trafficked in bills with a face value at and above $7.70 (!) equivalent in rupees, according to the government’s theory, most probably are doing it to under-report income or to engage in illegal business. Holders of cash in India were given a very short window of time to deposit their bills into banks, thereby becoming visible and trackable to Indian financial authorities. The war on cash quickly hurt the Indian economy, and by June 2017 the government began to reissue and authorize larger cash denominations, a set-back in its war on cash.

cashIn the US, the government phased out high-denomination bills of $500, $1000, $5,000 and $10,000 back in 1969, as they realized these bills were rarely used, except by tax evaders and criminals. Last year prominent Harvard economist Kenneth Rogoff attacked the $100 bill as mostly useful for illegal activities, urging its banishment in his book The Curse Of Cash.

Despite Rogoff’s encouragements, cash seems unlikely to go away anytime soon – it’s still just too darn convenient. I’m sympathetic to the idea that where you fall on the cash vs. cash-less spectrum of preference might have something to do with how much you want to hide your economic activities from the government. On the other hand, a certain type of skeptic believes the move to cash-less transactions foretells a more authoritarian society, one less free from the prying eyes of big government in league with big banks. The War on Cash, in that alternative view, is really a War on Privacy. They have a point as well.

As for myself, of course I use electronic transfer services, credit and debit cards, and have happily experimented with money-transfer mobile payment apps like Venmo, SquareCash and ApplePay (although the latter seems rarely available at merchants in my part of the world). For small in-person payments, I tend to pay for everything with $2 bills, $1 coins, and Kennedy half-dollars, just to mess with merchants’ cash registers. But that remains mostly an affectation rather than a declaration of my relative criminality or privacy, or my stake in the ongoing war between cash-only and cash-less commerce.

 

A version of this ran in the San Antonio Express News and Houston Chronicle

Please see related post:

I have a thing about paying with $1 coins

 

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