Love – And Business – In The Time Of Coronavirus
March 23, 2020 Timothy Prickett Morgan
We are shaped by bad times as much as good ones. Maybe more.
Some of my earliest memories as an aware young person are of the effects of recession on my parents when they were young people working in the factories of New Jersey. And when I say young, I mean we were all young at the time. Both of my parents lost their jobs in the recession of 1960 through 1970, and they lost them again during the much worse recession from 1973 through 1975. It was scary for me and my siblings, but obviously even scarier for my parents, who knew a lot more about the world than we did at the time as kids. And they kept their cool, as far as I know, and I only saw them fight over money once when things were particularly tense. We learned to garden as kids, had lots of fruit trees and berry bushes, and I dabbled in fishing and hunting and trapping.
That first recession I can remember was caused by budget tightening of spending by the U.S. government as the Vietnam War was peaking, unfortunately coinciding with interest rate hikes by the U.S. Federal Reserve, which was worried about inflation. The second recession only a few years later, in my opinion, was the result of rising competition from Europe and Japan after their long, tough economic revival – which the United States funding to a great extent – and the increasing multinational nature of the world’s largest corporations, who started to dominate the economy. The 1973 oil crisis started it, but that was an effect as much as a cause.
In my mind, with the exception of the dot-com boom from 1995 through 2001 and then its revival starting in about 2010 or so, we have been in one long, slow motion recession with occasional peaks that look like prosperity – the rising values on Wall Street and our 401(k) savings accounts, or the mostly steady appreciation of real estate except during the troughs are two good examples – but job security for most people is nowhere near what it was in the 1950s through the late 1960s. From the point of view of the United States, the dominance that we had in setting the pace for the global economy after having been the key force in the winning of World War II started to wear off as other nations themselves arose and competed. That time that we look back on, so jarring compared to the Great Depression that made the Great Recession look like a toy collapse, are the result of an artificial condition that cannot be replicated again.
This time around in early 2020, we have had another oil shock, and oddly enough, it is the low price of oil that is exacerbating the problem, as Saudi Arabia and Russia are in an oil production capacity war. This sounds crazy, and it is ironic that oil prices are low and people can’t really take advantage of it because of the quarantine that is locking down this country and others. Everyone is hoping for a V-shaped recovery, not the elongated U-shaped recoveries in the recessions of the 1970s, the 1980s, and the 2000s. This one, which is predominantly caused by the coronavirus outbreak, takes elements of all of these past recessions – overdependence on oil (foreign oil in days gone past and high oil prices for domestic production now), overvalued stocks, overvalued real estate, multinational corporations more interested in share buybacks than in building strong and hopefully diverse businesses – and weaves them together into a new waveform. We will see what shape that recession and its recovery takes, and we are hopeful that the governments of the world will act swiftly and decisively to keep the economy flowing.
The central thing to remember about an economy is that it is not an absolute value of something, but one that is really based on flow rates. We think of it like it is an ocean with a certain amount of water when it is really more like a water park with funky rides that looks and feels like a lot of water because it is in high motion in a much smaller closed system. We have just stopped a whole bunch of the areas in the water park – the cruise industry, the airline industry, and the hotel industry are down, the auto industry and the real estate industry are probably going to take a hit, and the effect on the healthcare industry is uncertain. The retail and shipping industries might be doing alright, despite it all, because of the stockpiling that citizens are doing. But the water does not evaporate so much as slow down or pool in other places. A lot of American water moved overseas with manufacturing jobs, so we cranked up the velocity on the financial and services streams to compensate. The trick is to keep the water moving as much as possible, and while we got a much later start than perhaps we should have in the economies in North America and Europe, the federal governments are starting to move.
The flow never stops, and we all have to do our part to keep it moving. And I am not talking about what seems to have been the case through a lot of economic crises in the past, where we have been basically told to just keep shopping and taking our vacations. That is not sufficient, and it never was. What companies need to do is try to do as much business as they possibly can and keep as many people on the payroll as possible to keep as much flow going as possible. We are lucky in many ways in the IT sector. Programmers and system administrators can still do their work from home, company meetings can still be held using conferencing software, sales calls can be done on the phone or using conferencing software, and IT wares can be paid for or financed for electronically. Yes, cash flow is going to get tight and so is credit. These will have an adverse impact on the flow rate across all companies and people that constitutes our global economy.
Now is the time to be clever and to take action, and we are here to help the IBM i community in any way that we can. Our strong advice is to do something. Make your products and services relevant to the current situation, and help position then for the situation as it evolves over the coming months and moves back towards something resembling normalcy.
No one expects for us all to be doing much last week, this week, or next week. It is hard to concentrate with so much change and uncertainty. Everyone here at IT Jungle has been wrestling with the issues of remote family members, kids home from school or day care, worries about shocks to the economy and our own business. It takes some time to absorb all of the information and reckon how conditions are changing.
Here is the other thing to remember: We will be different on the other side of this, and maybe for the better. Here is one possible example.
We have spent decades using computer systems to transform the manufacturing, distribution, and retail industries with just in time approaches that have limited supplies of parts and finished products in the entire supply chain, getting the large portion of inventories off corporate balance sheets and also keeping companies from having to write off inventory that, from time to time, doesn’t sell. It has been a boon, but it has also made that supply chain more brittle. There is some value in being able to design and make things for all regions and to not become overly dependent on one or two sources of things. The real issue, at least where we live, is that everything seems to come from somewhere else. Maybe if we pay a little more for things it would be affordable to have more local production and local jobs and reduce our dependence on stuff made elsewhere. This goes as much for China as it does for Europe and the United States. It is hard to imagine how we pull back the reins on Wal-martization, Uberization, and globalization because the volume manufacturers and retailers win all contests. But maybe they shouldn’t. Might does not always make right. And before some of you go off and start thinking we are talking about command economies and socialism, we most definitely are not. We are staunch capitalists and entrepreneurs. But capitalism — at least good capitalism as we imagine it — requires for capital to be deployed in a way that has a positive feedback loop into and back out of society.
The irony of all of this, of course, is that the coronavirus outbreak demonstrates all too well that this is one world and we are all in this together. There is only one global economy at this point with administrative regions we call nations.
I am not saying this is good or bad, but rather that this is a mix of good and bad, just as it was when nations were largely independent and much more likely to fight over new territories (new to them, at least) in a world that started globalizing beginning with Genghis Khan in the 1200s and after the trip to the New World by Christopher Columbus three hundred years later, which was Spain’s effort to try to re-establish the trade that the Mongol Empire formalized between Eastern Europe and Asia across land back in the 1200s but this time over what many in Europe thought was a single ocean that connected the West coast of Europe to Asia. No one imagined that North, Central, and South America was there.
But from 1492 forward, Pangea, the monolithic content that was formed around the time the dinosaurs started to roam the earth 250 million years ago and started rifting 140 million years ago to create the world as we know it, was stitched back together with regional wars over resources that raged for hundreds of years. And the threads that pulled it all back together, virtually, was Mexican gold and Peruvian silver (for obvious reasons), and Peruvian and Chilean guano (agricultural revolution thanks to seabirds), Chinese and Japanese manufactured goods (one of many waves), and European shipping and military might. Globalization is not new, but actually quite old. We could talk about the Greek Empire, the Roman Empire, the Aztec Empire, and of course ancient Egypt and the Xia, Shang, and Zhou Dynasties way, way back in China, too. But those were really regionalization, a fractal miniature of globalization.
Here is our commitment to the IBM i community. We are going to keep doing what we do, and we want to help you all do a better job serving your companies in the work you do.
We are counting on the vendor community to do things to help users justify continuing investments in the IBM i platform, and that might include special deals, services, pricing plans, and other things that keep things moving. And we are counting on the user community to reach out to tell us the smart things they are doing to help their IT departments pivot in a recessional environment. We are all in this together, and we want to come out together on the other side. So please, reach out and let us tell your stories and get out your message. We will keep a running compendium of special deals and services that IBM i vendors are offering in our Four Hundred Monitor section so you can keep track of it, starting with a special deal for free licenses to Presto web development tools for IBM i from Fresche Solutions.
Be safe, everyone, and let’s help each other.