4 Predications for a Post-COVID-19 World
Virtual-Health, Counter Urbanization, and a Digital Overhaul.
Now that the new normal has become, well, normal. I thought it would be interesting to put together some of my predictions for a post-COVID-19 world. Which begs the question,
What is going to change in a post-COVID-19 world?
Overhaul of Fed’s and State’s critical digital and healthcare infrastructure.
One acronym for you: COBOL. Ever heard of it? Nope. Most Americans hadn’t until recently when many Americans filing for unemployment found out that many of their individual state’s unemployment filing systems couldn’t handle the number of unemployment claims. This was due to the systems being run on COBOL, the decades-old programming language that was first introduced by IBM in 1960.
This excerpt from OneZero tells why many of our state governments and departments of our federal government still run on this legacy system,
“The Government Accountability Office has repeatedly warned about the use of legacy programming languages for critical systems. In 2019, the GAO issued a report summarizing 10 federal computing systems that were in desperate need of an overhaul. For instance, the Department of Education’s system for processing federal student aid applications was implemented in 1973. It takes 18 contractors to maintain the system, and since it’s written in COBOL, it requires specific hardware and is difficult to integrate with newer software languages.
GAO considers COBOL a legacy language, which means agencies have trouble finding staff that knows how to write the code at all. And when they can, the specialist contractors charge a premium.
Despite its age, and the fact that so many programmers have moved onto C and Java, COBOL is still a widely-used programming language. It’s tried and true, which is partly why it was so widely adopted by banks and governments in the second half of the 20th century.”
*Fun Fact about COBOL: Our banking institutions are severely dependent on it as well. Nearly 80% of card-based transactions use the code.
I know the old phrase, “If it ain’t broke don’t fix it” may apply here, but systems like this weren’t expected to handle the unemployment claims of over 10 million-plus Americans.
My prediction is that whichever candidate wins the November election will authorize a major overhaul of all legacy systems that our state and federal governments currently run on. Our government’s critical digital infrastructure needs the overhaul if we’re going to be ready for the next decade especially with the rise of automation.
Like many Americans when the pandemic first hit, I was dumbfounded when I found out that the federal government didn’t have a gigantic stockpile of masks, latex gloves, and ventilators sitting in some undisclosed military bases around the country for pandemics like this.
It turns out they do have a stockpile, referred to as the Strategic National Stockpile. No joke, it was created by the Clinton administration after Bill Clinton read the Richard Preston novel The Cobra Event, which is about a mad scientist spreading a virus throughout New York City. It originally only stored pharmaceuticals and vaccines until 2005 when George Bush authorized the stockpiling of personal protection equipment (PPE), such as surgical and N95 masks. After the 2009 Flu Crisis, neither the Obama Administration nor Trump Administration restored the stock-pile after millions of masks were used.
My original prediction that the US would increase the size of its Strategic National Stockpile has already come true with the passing of the CARES Act. The CARES Act specifically outlines the need to increase the number of masks, gloves, ventilators, pharmaceutical supplies and now testing swabs added to the stockpile.
My second prediction is we will see the federal government require U.S.-based pharmaceutical companies to relocate a portion (at least the portion responsible for creating critical vaccines/drugs for pandemics), if not their entire drug-supply chain, to be based within the U.S. According to the FDA, nearly 72% of pharmaceutical ingredients supplying the U.S. are manufactured overseas, including 13% in China. Our nation is far too reliant on the manufacturing of critical materials to be based abroad. It can and will be brought back to U.S post-COVID-19.
Widespread adoption of virtual health platforms and drug delivery.
According to the American Hospital Association (ACH), nearly 76% of American hospitals currently use video to connect with their patients. With that data in hand, you could say that virtual-health adoption has been pretty widespread. The ACH goes on to report though,
“…limited access to adequate broadband services hampers the ability of some rural facilities to deploy telehealth/telemedicine. The challenge of cross-state licensure also looms as a major issue. Other policies and operational issues include credentialing and privileging, online prescribing, privacy and security and fraud and abuse. The federal government needs to do more to increase the use of telehealth. This decade will be the decade of the cashier-less store.”
Despite these bottlenecks, nearly 66% of Americans are interested in using virtual-health platforms. That number increases to 74% when considering the 18-34 age group who like the convenience virtual-health provides.
This data excites investors and entrepreneurs alike. Teladoc Health, one of the largest virtual-health companies, has seen its stock price return 66.15% YTD with an annualized return of 246.37%.
According to Pitchbook, health-tech businesses raised $7.8 Billion with only 6% of that total going to virtual-health businesses. I expect the amount of venture capital dollars going to virtual-health businesses to increase exponentially post COVID-19. Companies like Ro, Hims, and Birmingham-based Dr. Wellington can and should see an uptick in their valuations.
With the pandemic forcing cities to enact shelter in place orders, virtual-health providers have provided consumers the ability to conveniently schedule check-ups with their doctors. This is especially great for the non-essential care that had to be put on hold in order to make room at hospitals for COVID-19 patients.
COVID-19 is exposing more Americans to the benefits of virtual-health platforms that provide them convenient and faster care from their own home. In turn, it allows hospitals to focus on more critical care patients and put less strain on the overall healthcare system’s resources.
Delivering medicines is another part of the virtual-health adoption equation. I couldn’t find a solid data source, but most reference between 8%-11% of Americans use an online pharmacy to order their prescriptions. The main drivers behind the use of online pharmacies are convenience and savings; consumers can save hundreds if not thousands of dollars each year on prescriptions by ordering them online.
Over the course of the COVID-19, Healthwarehouse.com, the first online pharmacy licensed in all 50 states has seen an uptick in business, their CEO Joseph Peters commented,
"Starting March 9th, the pace has been off the charts," said Peters. "Not only our pre-existing customers—we've served over half a million in our history—but also we have had a sharp rise in new customers. People who traditionally have gone to pharmacies in their community are moving toward mail order, cash pharmacies and ordering in larger quantities. We expect this trend to accelerate in the coming weeks and months."
Considering the same factors that have made and will make virtual-health so attractive to consumers can be applied to online-pharmacies. That will only be accelerated by COVID-19. Companies like Alto Pharmacy, Healthwarehouse.com, and Truepill will also see rises in valuations and become attractive acquisition targets for the likes CVS, Walgreens, Wal-Mart, etc.
Mass Counter-Urbanization will accelerate exponentially.
Mass globalization and urbanization were two of the key drivers allowing for COVID-19 to spread so quickly from Wuhan all the way to New Orleans. Significant population density turned a city like New York City into the center of the epidemic in the United States.
This combined with the already significant rental and home prices could be cause for mass counter urbanization in cities such as New York, San Francisco, and Seattle, etc. Mass urbanization in these cities can be further accelerated as commercial office space becomes more and more expensive in large urban centers where leases can range from $80/sqft to over $119/sqft. Thus forcing businesses to relocate their offices outside of major cities or depend increasingly on remote workers.
Why live in a super expensive urban center when you can work from an affordable house in a great school district and can do work from home utilizing Zoom, Slack and any other productivity tool?
Brookings Institute provides a counter-argument to this prediction that the very reason these cities have struggled to contain this virus are the strengths that will let them recover quickly and make them less susceptible to counter-urbanization.
“Innovation economies—where major universities, hospitals, medical research institutes, and industries cluster and connect—are not only providing physical places for recovery but are working to defeat the virus by developing a vaccine and identifying places and populations with the highest need.”
It’ll be interesting to see how the population in major American urban centers fluctuates after COVID-19 (someone please remind me to write a follow-up story to this a few years from now to see if this prediction was correct).
We won’t get the next Uber or Airbnb from this crisis
The general consensus I’ve seen on Twitter is many great companies were started during financial crises. This is true; Uber, Lyft, Airbnb, Credit Karma, and Cloudera were founded over the course of the last crisis. I am, however, focusing on two of the most valuable companies to come out of the Global Financial Crisis (GFC), Uber and Airbnb, and why the COVID-19 induced financial crisis we’re seeing today is not going to give us the next Uber or Airbnb.
There are three key variables that allowed for Uber and Airbnb to grow successfully out of the GFC.
The launch of the iPhone (particularly that it came with GPS enabled location tracking).
The launch of the Apple App Store. Allowing for apps like Uber, Lyft, and Airbnb to be downloaded from anywhere and even be used by consumers, to begin with.
A talent exodus from Wall Street. Our best engineering and business graduates stopped going to Wall Street and started going to Silicon Valley to build companies.
I don’t think we’re getting the next iPhone anytime soon nor a new App Store. I doubt we see many Wall Street types of peace out of their investment banking gigs for roles out in the Valley because of COVID-19. If anything, we will see the talent at existing or shuttered start-ups go to companies with much more viable and less cash-intensive business models that can ride out the pandemic.
The next great start-ups will not be in transportation networks (like Uber, Bird, etc.), lodging, or a direct-to-consumer brand. The next great tech start-ups will operate in virtual-health, A.I, productivity tools (Zoom, Slack, etc.), and Edtech. Categories that are optimized for the long term and are essential to the consumer and to businesses.
When times were good, Uber and Airbnb grew like wildfire and their valuations grew concurrently. Yet, now that times are difficult and will be for the foreseeable future, both companies — as well as those with similar business models — will see their valuations come back down to earth. Uber went public at $45 a share with a valuation of $82.5 billion. Today, the company’s stock trades around $27 a share, giving it a market cap of $46.83 billion. Airbnb just this week had to raise $1 Billion in debt with a 10% interest rate, which can then convert into equity at an $18 Billion valuation — a significant discount from their current valuation of $31 Billion.
Investors and entrepreneurs alike have learned their lessons when it came to investing in and starting companies with the “Uber of” business models. Uber and Airbnb, as well as equally successful companies with similar business models, aren’t going anywhere. That being said, new and current businesses utilizing the “Uber of” model won’t nearly command as much investor attention and outsized valuations in the future post COVID-19
Let me know what you think of these predictions. I would love to hear your feelings and thoughts on what you think of post-COVID-19 world looks like, especially what new technologies will become more widespread.
Happy learning and wash your hands.
-Sean