Our Economy Was Just Blasted Years Into the Future
By: Steve Levine
Tags: Economy, Automation, Society, Business, Future

Throughout history, pandemics have left varying, sometimes momentous impacts on the societies in which they have occurred. In the 16th and 17th centuries, smallpox, measles, and other diseases brought by the Spanish wiped out up to 90% of the South and Central American population, utterly transforming the historic order. Conversely, the global flu pandemic of 1918 to 1919 appeared to establish no new norms, suggests Harvard political scientist Joseph Nye. Rather, the approximately 50 million flu deaths seemed to blend into the general slaughter of World War I and go on to be all but forgotten until modern historians began to write about the calamity in the 1970s.

As a catastrophe, Covid-19 itself appears so far to be a hybrid in impact — vastly speeding up some potent trends while quickly dispelling others that people thought were happening but actually weren’t. Cliff Kupchan, chairman of the Eurasia Group, says such acceleration is a natural byproduct of crises like pandemics, which “tend to jolt the current system.”

Against the backdrop of a two-century period of faster and faster transformation, the coronavirus is compressing and further accelerating the arc of events.

“There is pressure on all trends, and only the strongest, most vibrant continue to be underway,” he says. “Only the fittest survive. You have a Darwinian moment for trends.”

What Kupchan is describing is an economic time machine. Against the backdrop of a two-century period of faster and faster transformation, the coronavirus is compressing and further accelerating the arc of events.

Consider the shift to driverless automobiles, one of the most-predicted events of our time. In the popular vision, repeated countless times by Silicon Valley, Wall Street, Detroit, expensive consultants, think tanks, and governments around the world, the human race is quickly shifting to a world of autonomous, shared cars. Starting in the early 2020s, it has been said, people will travel in such vehicles, heedless to their surroundings, relaxing, working, or shopping in smart metropolises looking substantially like Orbit City, home of the Jetsons, perhaps even including a few flying cars. This newfound liberation from the steering wheel would be a bonanza for automakers and Silicon Valley alike, producing tech-laden vehicles that would suck up a constant flow of lucrative data from the passengers. So certain was this future that the major automakers and Silicon Valley went on a spending spree to make it a reality, investing a collective $16 billion.

That was then. Even before Covid-19, many auto hands were already expressing private doubts about the timeline. But now, prominent names have mostly stopped making predictions about what they will produce and when they will produce it. Ford has outright postponed the 2021 debut of robotaxis and driverless delivery vehicles, saying that the virus could have an unknown, long-term effect on consumer behavior. BMW says people seem not to want to get into the kind of shared, autonomous vehicles it had planned but instead to drive their own car. GM has shut down Maven, its car-sharing service, and laid off 8% of the workforce at Cruise, its driverless vehicle division.

One reason for the doubts about the revival of gains for workers is yet another byproduct of the coronavirus: an accelerated automation of jobs.

Some of this is the auto industry feeling its own mortality: Ford expects to lose $5 billion this quarter after a $2 billion loss in the first three months of the year. Fiat Chrysler also lost just under $2 billion the first quarter. GM made a little money — $294 million — but that was an 86% drop year-on-year. It has been the same abroad: VW’s earnings plunged by 75% in the first quarter, and Toyota says it expects its full-year profit to plummet 80%.

But the industry has also lost confidence that a fully autonomous, go-anywhere vehicle is possible any time soon. In a Wall Street Journal report on May 18, Uber — whose business model until recently centered entirely on mastering autonomy — was said to be reevaluating driverless research after burning through more than $1 billion. It was stunning news since just last year, Uber’s self-driving unit was valued at $7.25 billion. In addition to the major players, tens of millions of dollars of venture capital has gone into countless startups, among them Argo AI, Zoox, Aurora, and Voyage.

No one is publicly giving up — that would be too much of a concession given the hit they would probably take from Wall Street. Rather than an admission of failure, look for one after the other to embrace lesser, limited autonomy such as lane changing, highway driving, and automatic parking.