We are entering a new era of intense fear, but it will be different from the fear of winter and spring 2020.
In the end, we’ve learned a lot, even with no treatment or vaccine. The Latin countries ended up adopting the measures of the German countries (including the Swiss and the Austrians). By placing at-risk people in respiratory assistance much earlier, we have cut losses. We have also collectively sharply improved in the ways that we protect ourselves. Whatever anybody says.
However, we are not saved from the consequences of the virus – neither in health terms or more particularly, economic terms. The next 3 months will take us out of summer in most of the densely populated areas of the northern hemisphere and into viral winter. Already in the more northerly areas of Europe, at any altitude worth mentioning, evenings are cooler and precipitation has started to return.
As I have already written, this virus will launch its new winter campaign from a much more powerful platform than the first wave did. In France, for example, we are currently reaching a rate of 4% of the population testing positive. The rate of new cases per million inhabitants reached that of the United States yesterday, as I write these words.
Combine that with more humid air and with the classic reduced immune defenses in winter, and everything would seem to come together for a spectacular viral season. Have we learned enough to guard against that? This is the $100 billion question that governments around the world would like to answer.
But in many ways you might think so. The virus is growing at a slower rate than in the spring, when our politicians thought we were too stupid to wear a mask. It’s a shame this simple gesture was never generalized, or today we would simply be out of the woods. But our world is like that, now. Someone is always ready to deny the obvious. The odd thing about this story is that governments and conspirators alternately swapped positions. Hilarious, right?
Economically, in parallel with this health situation, we will enter an economic winter. This is what everyone is talking about: end of partial unemployment policies, waves of massive dismissals, explosion of bankruptcies. There is no doubt about any of this.
For our part, Pentalog believes that all economic agents will more than ever be in the dark during this period: real estate purchases, business investments, consumer goods… everyone is going to lose the GPS signal.
But – what about the American election?
Wall Street seems to have chosen its camp: against all expectations, that of Donald Trump. More reassuring than ‘Bolshevik Biden’, and probably the one that Europeans should also choose, because ultimately, Trump’s behavior weakens one of Europe’s natural adversaries and complicates its relationships with its unwavering allies: Japan, the UK, Canada …
In this landscape, the US election will influence the economy far less than might be imagined. Its impact will above all be US-internal. Politics… Neither Trump nor Biden will change the US economy fundamentally – maybe on the margins, while COVID exerts massive pressure on us and bridges directly to the underlying recession that was already brewing.
Whatever conditions are on the day of the election, the US economy will remain one of the most resilient in the world, because at the end of the day, nothing on earth is more pragmatic than an American.
What matters once again is the analysis of the competitive situation. American stock markets are either going up (the Dow) or going up a lot (the Nasdaq), while European stock markets are running on empty, with the French CAC 40, London’s FTSE, and even the once-mighty German DAX limping along at the bottom, along the baseboards.
American tech flew over the crisis, proving it was adapted to any circumstance. Before – or for that matter, after – the COVID crisis, technological competitiveness will always make the difference, and in just over a year, Europe will be left behind by about a decade. Europe is collapsing technologically, and the GDP of the southern European Latin countries will fall back 15 or 20 years, with no real hope of return.
Trump or Biden? Who cares? The real problem lies elsewhere. We are experiencing the last upheavals of the Roman Empire live! But 2000 years of semi-leadership was a pretty good run, wasn’t it?
So let’s keep it simple:
By 2021, Italy, Spain and France will have lost 20% in GDP per capita against China and 10% against Germany and the US.
Even if we make the right decisions, it will still take 20 years to recover from such a shock. But we have to ask: since when has southern Europe known how to make good decisions?
So what will happen now and how should entrepreneurs react?
Since the start of this unprecedented crisis, we have been providing you, with no special magic, with analyses that have proven to be as coherent as possible. For a simple reason: we started from the source of scientific knowledge on the one hand, and on the other, we crossed the impact of the virus with known theories of economics. Then we stuck on the agile marketing tactics that to our eyes, looked adapted to the situation for 3 months. Not rocket science!
I don’t know about you, but during this period, we have been investing significantly in marketing, and the results in terms of the number of leads has been remarkable. It was relatively easy to do, given a very low number of assumptions about the health/economics pair.
If things are getting more complicated today, that’s because we are about to enter a period that will be very difficult to analyze and explain, since we are going to be pulled in a lot of different directions. Good news on the health front is likely to appear (but nothing is less sure), but in a devastated economic landscape. That means the good news may therefore be difficult to discern.
An initial key date: November 23 – at what rate are hospitals filling up?
For us at Pentalog, that Monday (the 23rd) will be a turning point. We did not choose that date at random, because it will be the culmination of a week of examining the health situation at a time when weather conditions have been getting worse for a while.
We will be paying close attention to growth in the numbers for:
- New cases in the previous month
- Admissions to intensive care
If, as I hope, thanks to the measures already in force, we see that these curves are only increasing 2 to 5 times slower than in March-April, we – my group and I – will move forward on a more optimistic reading of the situation. The medical profession seems to be leaning in favor of this option.
We will then consider that the recovery scenarios for 2021 that have been announced to us are reasonable, perhaps even a little timid. The information we extract on November 23 will not really be integrated by economic decision-makers until around the beginning of February. But that does not mean it will be time for dancing in the streets. No, there will probably even be a lot of sick people and a lot of severe cases. But the virus’ pattern of reproduction will have been stopped. And next spring will then be characterized by an intense acceleration.
I therefore suggest, my dear entrepreneurs and decision-makers, to take stock on November 23. We will almost certainly conduct a PentaLive on this occasion to share our observations, our 6-month strategies, and our 3-month tactics.
But let’s be clear: in this scenario, the signal will be brutal for the digital sector, because the historical Fortune 500 players, who traditionally suspend their spending when things are really bad, will come back to themselves with a considerable delay compared to digital natives during the period. Some will have seen their income increase by 25 to 35%, while others will have fallen off by 10 to 20%. And that will have lasted an entire year, during which the innovators let loose!
Between 2021 and 2023, a genuine replacement of economic players will take place. To try to escape it, our brave dinosaurs, who believed in controlled disruption and digital transformation – but only under anesthesia – will have to work twice – or even three times – as hard. I expect to see digital costs explode in 2021, some in software, but a lot in human resources in particular. I forecast this acceleration of projects and resource requirements around the very beginning of March. Budgets cut to the bone in October will explode in the spring.
My second, more pessimistic scenario postpones any really significant improvements by 4 to 5 months. Difficult winter living with the virus – new lockdown to be announced for December-January following the saturation of hospitals – return to a more normal situation at the end of April, beginning of May. In this case, I will provide you with fresh indications towards the end of February.
The democratic key to understanding is not, by any means, economic.
The sociological and democratic key would be the inability, just like the last time, to admit all the sick and send people back to die at home – or in the streets …
Ultimately, as far as public health is concerned, I lean towards scenario 1.
Between the two scenarios, there will only be a maximum gap of 3 months.
This means that 2021 will be a year of strong recovery everywhere, but which will probably result in record growth in digital salaries. Believe it or not, after a short break of a few months, we are already seeing recruitment raids by top business decision-makers. Including among the brightest retailers, who have now clearly decided that their future will be nothing other than digital. Those who have barely survived can only stand by and watch, struck dumb by the astronomical number of bankruptcies in their industry, around the world.
The role of entrepreneurs is to invest, and for a long time, there had been no entrepreneurs in these companies.
Outside digital, there will also be some recovery. But slower, much slower… This speed difference will result in the continued loss of market share from local retail in digital, and in non-connected products compared to connected products. But you already know all of this. This explains why at best, we will catch back up to the 2019 level in 2023 or maybe 2024. China has already exceeded in Q2 its Q2 2019 by 2.5%. The differentials are mind-boggling.