Submitted by Norm Robins
No doubt we are a nation in crisis. The current virus has killed well over 100,000 of us. In an average year 30,000 die of whatever flu is making the rounds; 39,000 died in auto accidents in 2018. So far, we have outdistanced those normal numbers.
Our unemployment rate and projected 2nd Quarter GDP are appalling. Ditto for productivity growth. Corporate debt is used to buy back shares, not for capital investment as is traditional, so our increase in the capital stock, the stuff that makes our labor more productive, is slipping. Our relations with China have entered dangerous ground.
Race relations that have dogged us since we were 13 colonies hugging the Atlantic seaboard are back on the front burner. Kids are graduating high school and college with no job prospects on the horizon. Families have held savings woefully inadequate to cope with the economic downturn we are experiencing. Families have started rebuilding them.
But we are coming out of our problems, mostly. So where do we go from here? I don’t know, but I do know one thing: whenever we have come out of a crisis, we have come out different than we were when entering the crisis. We pick up new habits in a crisis.
During World War II women emerged as a viable workforce. They still are. Before that they weren’t. Men coming back from the War didn’t want to live in small apartments in crowded cities. They wanted houses in the suburbs that had backyards. They didn’t mind commuting to work so they bought automobiles, and governments built roads to accommodate them.
Employers didn’t trust the idea of staff working from home. They had no control over the worksite. That has changed. Employers now realize people who work from home produce just as much as those in the office, perhaps more. And employers don’t have to pay for office space to house them, air conditioning and heating to keep them comfortable, or electricity to light their workspaces.
We have 55” to 80” TV screens with HD now and 4K right around the corner. Why go out to an expensive theater and search for parking when you can stream something you want to see and pay only $3.99 to see it?
Why dress up and go out for dinner when you can order takeout and dine at home in your scruffies? You won’t incur a sales tax that way or tip the waitress or buy a glass of wine at twice the retail price.
More importantly, many employers won’t have to have employees on-site. They can work remotely. Within the workforce, 75 percent work with their hands, 25 percent don’t. And why would anyone who wants to live in Reno or Salt Lake City or Boise and who can work on a terminal hooked up to a server in California want to live there? The taxes are onerous, the traffic deplorable, and the government detached from reality.
Why would anyone want to get on an airplane to attend a meeting when WebEx and Zoom are a piece of cake to use. Why would an employer want to pay for an airplane ticket, a hotel room, and an overpriced meal or two when he doesn’t have to?
And as California gets more and more dictatorial and invasive, companies are moving out to more hospitable jurisdictions. An iron law of business says that capital will go where it is welcome and stay where it is well treated. Jurisdictions dismiss that iron law at their peril. To a large extent Nevada understands that iron law. Good for us!
So much of our GDP is spent on services, surprisingly so, doubly so in Nevada. If families need to tighten their belts, spend less, and save more, which they do, it will come out of their discretionary budgets, mostly services. A dollar put into a savings account is a dollar not spent at a restaurant or on a night out. Beware, Nevada’s service sector, there is danger ahead.
My advice? Keep your eyes peeled for the changes that are coming. In times like these, they always do. If you don’t adapt you will be crushed. If you do, you will survive and prosper. Darwin was right–the adaptable survive. But, we will exit this crisis through a door different from the one we entered. We always do.
Norm Robins is a retired entrepreneur and ex-engineer whose first love is economics and who has lived and worked all over the world. He has a B.S. in Civil Engineering from the University of Illinois, Champaign-Urbana, and an MBA in International Business from the University of California, Berkeley. He and his wife and one of his three children live in Reno, Nevada.
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