TLDR: The largest effects of major crises are often felt years afterward. As we begin to move out of COVID crisis-mode, now is the time to think through the next decade.
What we’re talking about: While the virus outbreak itself worsens in the US and Europe, the outlook for 2021 is looking brighter and brighter. Continued progress of multiple vaccines are the main reason, giving businesses a light at the end of the tunnel with the possibility of an end to the pandemic in sight. With this in mind, 2021 planning is now in overdrive, with dashboards and monitoring systems being setup to manage the gradual return to normal (see our article here about managing the timelines by country).
However, not only is the COVID-19 pandemic far from over, its largest effects are in fact likely yet to be seen. Looking back at the most recent global catastrophe, the 2008 financial crisis, demonstrates this. When you add up the consequences of events over long periods of time, outcomes grow, and they take unexpected turns.
Importantly for planners – the effects appear on different timelines in different areas. And they snowball over time so that the immediate effects are dwarfed by later trends that had their genesis in the immediate crisis and its aftermath. To illustrate the impact of the 2008 crisis - consider how the 2008 financial crisis played out across four key areas – macro-economics, global relations, digital trends, and domestic politics. And compare the evolution across four phases: crisis-mode, recovery and repair, consequences and backlash, and new normal. This process operates in years and sometimes decades, not months.
Applying this framework to the financial crisis highlights how the issues evolved, with the major business impacts continuing to arrive well after the crisis phase.
For instance in macro-economics, while the initial economic crash was the major crisis, the slow recovery, coupled with rising debt and inequality, was what encapsulated the new global normal a decade later. The issues developed in ways that led to a sluggish economic recovery that proved very difficult to come out of, driving a a highly impactful new normal of weak growth and high debt – a baseline from which the current crisis is now significantly worsening.
Importantly, the evolution of the issues combined as well as grew. While the political backlash in the US was immediate (Obama winning in a landslide in 2008), the longer term effects of political backlash grew over time in ways that can be tied to the crisis itself – the slow recovery, the inequality driving stimulus, perhaps even the acceleration of social media as the financial boom morphed into the tech boom. This long-term fallout resulting from the crisis contributed to the anger and distrust that got us to where US politics stands today – an outcome few would have predicted, but has arguably been of far larger consequence than the politics of the moment.
Similarly, in the midst of the crisis, there was enormous political focus on TARP and stimulus – but looking back, few would consider these the most crucial shapers of crisis outcomes. From a business standpoint, the banking sector would likely view Dodd-Frank, the creation of the CFPB, the acceleration of distrust in financial institutions, the persistent global prevalence of low interest rates, and the talent drain from finance to tech as far more consequential over time.
Global relations were reshaped as well. At the beginning, global action was coordinated and effective – a remarkably big difference from the COVID response a decade later – but the crisis changed international dynamics in marked ways in the longer term. A few years of painful debt crisis in Southern Europe yielded steps toward further European integration. Later, protectionism rose in countries where the voters had suffered through stagnant wages and austerity – which in 2016 ushered in Brexit and the mandate for the Trump trade wars.
Lessons to learn: While we can see a clear set of effects from the pandemic already today – massive and unprecedented stimulus packages around the world, even greater inequality, heightened and bipartisan US-China tensions, the growth of work-from-home trends, and more – we remain in the first effects stage of the crisis. Much of the immediate business impact lies in the shutdowns and the initial economic crash.
But the long-term consequences are likely to be even larger across the main areas of uncertainty driving the macro outlook. While it’s not possible to know specifically how the issues will evolve, it is important to think through the macro trends, and the range of possible outcomes over this longer horizon. Doing so will highlight where you remain vulnerable even as the world recovers, and reveal the next areas of opportunity to capitalize on the new normal.
It is easy to be paralyzed by this thought. Recognizing that after dealing with the largest crisis of our lifetimes – one we’re far from finished with - there won’t be respite from the turmoil. But paralysis isn’t necessary. Much can be done to think through where the world will head, and the main uncertainties driving risk in your business. By starting to think this through now, at the beginning of the end of the “crisis-mode” phase, you can set yourself up for success, and reduce the turbulence felt as the next shocks arrive.