It seems strange in these Groundhog days of lockdown to read an article entitled “The Great Acceleration” and that US e-commerce has witnessed more growth in the past 3 months as it as over the past 10 years.[1]
One would have thought the pandemic to be more aligned with uncertainty and potential stagnation than rapid growth. But the article by McKinsey[1] refers to the COVID-19 crisis accelerating and emphasizing trends that were already under way. This highlights a theme discussed in other posts – the crisis is forcing us to adapt to different ways of working and, now we’ve tried it, we have realised that the impossible or impractical is actually workable.
Perhaps less optimistic, however, is the recognition that the acceleration of these trends is also exposing the shortcomings of those sectors or segments in trouble. Indeed, the McKinsey piece goes on to highlight the widening of the gap of corporate profits; with the top quintile growing stronger and the bottom quintile getting weaker. They noted that “the six most-profitable industries have added $275 billion a year to their expected economic-profit pool, while the bottom six have lost $373 billion”. The sectors among the top performers being semiconductors, pharma, software while those at the bottom are banks, utilities and energy.
The drivers behind what we are seeing are multifaceted, however. I can relate to the explosion of the use of e-commerce, evidenced by the above graph. Unable or reticent to go out, Amazon has become mine – and my family’s – go-to method of shopping and whereas before it might have been used for only certain items, the recent experience has increased my willingness to look to the App for a broader array of goods. One barrier to me using it extensively was the risk of no one being around to accept delivery. Again, being forced to be at home more has removed that obstacle.
Similarly, as we shift to a ‘Zoom’ or ‘Teams’ based meeting environment, my focus on our IT infrastructure has increased. I am much more conscious of the fluctuations of our wi-fi capacity and with the heightened need for stability, more willing to consider alternative solutions – to the financial benefit of those firms providing such equipment.
But perhaps a less obvious driver of change is the mind-set shift among business leaders. The McKinsey article refers to “leaders are often in military-command mode, and pre-crisis budgets have become obsolete”. The rulebook has been thrown out and there is greater acceptance of innovative and untested ideas.
Looking beyond the ‘now’ it is important to consider the implications of these near-term accelerations in terms of impact on our future. Indeed, a web search of ‘great acceleration’ will bring forth references of the earth’s new age – the Anthropocene – in which human activity is a key determinant of our ecology and environment. Within this period the great acceleration is characterised as occurring most significantly within the past decade and starkly illustrated in the work of Professor Will Steffen et. al. in “The trajectory of the Anthropocene: The Great Acceleration.[2]” The graphs below show socio-economic and ecological trends, with the graphs – dating back to 1750 – steepening sharply around the 1950s.
The focus on climate change in the investment world was certainly gathering pace ahead of the pandemic. Hopefully this will not be set back by the current challenges, but it will be important to assess how our rapidly changing work and home lives impact the trajectory of these socio-economic and ecology trends.
[1] The Great Acceleration, 14th July, By Chris Bradley, Martin Hirt, Sara Hudson, Nicholas Northcote, and Sven Smit [2] The trajectory of the Anthropocene: The Great Acceleration Will Steffen, Wendy Broadgate, Lisa Deutsch, Owen Gaffney, Cornelia Ludwig, Anthropocene Review 2015
[1] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-fifty-the-quickening?
