COVID-19 Scenarios With Peter Schwartz | Salesforce
Peter Schwartz maps three possible COVID futures over 6 to 9 months based on health trajectory, economic policy, and public response. Best case: stamping out hotspots. Worst case: wildfire spread and deep downturn. He also outlines accelerated trends like remote work and de-globalization that could reshape business.
Chapters
Hello, I'm Peter Schwartz, the senior vice president for strategic planning of Salesforce. I'm Salesforce's chief futurist. And since the pandemic began, my colleagues Mick Costigan, Noah Flower and Angela Gleason and I have been thinking about the future of the pandemic. At first, we took a kind of long term look with our colleagues at Deloitte at what the world beyond the pandemic might look like. But increasingly it became clear that the uncertainty in the short run is very, very great. In fact, I've been doing this for 50 years and I have never seen greater uncertainty than we're seeing right now. You know, I've been through financial crises, wars, oil crises, the birth of the Internet, all of those things, and we have never seen greater uncertainty because of the fact that we have a health crisis, an economic crisis, social and even a political crisis going on in parallel. And this has created maximum uncertainty. So, in fact, we have turned to looking at the near term. In fact, it may be true that the short term uncertainty is even greater than the long term. And so we've been looking at, for Salesforce, our customers and our society, our stakeholders more broadly, what might happen over the next six to nine months, how might the pandemic, the economy, society, all interactions together to create the world that we will inhabit over the next six to nine months. So we basically developed a framework that looks like this. The upper half of this graph talks about what's happening with the pandemic, namely, what's happening with the number of new cases. And in nearly every case, every situation, what we saw was a dramatic increase. Then people began to take it seriously and began to try and take measures to suppress it. And we saw a decline in most places. We'll talk about what we mean by most places in a moment. And the consequence of the efforts to suppress it, namely a universal shutdown for almost everybody, created a massive economic crisis. And so governments began to respond to try and take action in that regard, namely to try and provide money to the system, not really stimulus, but to cover the economic losses, put money in people's hands, to put money in business hands. So that's the kind of basic framework we began with. And in fact, my good friend Martin Wolf at the Financial Times, he's the economics editor there, said that in a war, governments spend freely. And indeed, this is very much like a war. The scale of impact is like that. And so they have to get together and prevent the massive disaster. Think big, act now together. And a few countries have done that. But sadly, most of the world has not done that. And in fact, what we see is the economic consequences of that. These are the economic forecasts for many of the key countries in the world. This is the worst recession we've ever experienced. Nearly all of them were looking at growth in varying degrees, say last October. That was the forecast. Then the pandemic hit. And the first forecasts were bad for most of those countries. That's the kind of lighter purple line there. But the most recent forecasts in June were catastrophic. And so what we're looking at is a massive recession and maybe even a depression worldwide. What makes this unique is that it's simultaneously happening everywhere. In most recessions, you know, there's a disruption in the United States or Europe or developing countries and so on. This is different. It's impacted everybody everywhere almost simultaneously. And that is unique. So it's interacting on an extremely large scale. So as we went forward, what we looked at were three fundamental sets of uncertainties. The first, in many ways most important is what's happening with the health crisis. And that is shaping the behavior of what we call the hammer, the period where you have to slap things down. And so important questions are really the dynamics of the virus itself. There are things we don't fully understand about how it spreads. Secondly, the question of the vaccine. How soon will we get one and whether we get one, Will there be mutations, will immunity develop, and so on. So there are still big uncertainties with respect to the dynamics of the health crisis and frankly, our resources to deal with it. The second big uncertainty is the economy. How effective are the economic measures that are being taken to support the economy? Will they continue? You know, in the US we had a very large scale and actually pretty effective stimulus in the first wave. Now the second is hung up. And the question is, will Congress in the United States pass the necessary bills to provide support into the third and fourth quarters of this year? And similar questions are being raised elsewhere as well. How much support do their economies need? So that's a second uncertainty. And then the third uncertainty is about society. How does society respond to this? I mean, first of all, we had just the question of would people behave appropriately, maintain social distancing, wear masks and so on. Now, in much of the world that behavior was just fine. But in the United States, where we have a kind of culture of anti authoritarianism, a large part of the public, even without the kind of political dimension pushed back on the restrictions, then you add the political dimension to it and it becomes even more dramatic in terms of the internal tensions over that, to which we then add the crisis of the Black Lives Matter movement following the murder of George Floyd and continuing issues that have now spread social disruption, not just in the United States, but around the world in terms of concerns about racism and exclusion. So what we now have is a perfect witch's brew of a health crisis, an economic crisis, a social crisis, and even a leadership crisis in many places, especially in the United States. So that's what we're seeing. You know, we've gone through the first phase where we lost control. Most places we're coming out of the hammer. And then the next phase is what reopening begins to look like. So we're going to talk about how all that will play out. And to do that, we have to understand how the health crisis has actually developed. So this is the framework that we're using to describe the kind of future dynamics of the crisis. What you see here on the vertical axis is number of new cases per million population. And so what you've got are three zones of concern. The first is the green zone. This is the best place to be. This is where the number of new cases is roughly below 50 per million. And that means you can take precise measures to control it. Cluster busting, as it's called, early identification of a cluster, test, trace and isolate. And if you don't have too many, if you're in that zone, you can probably manage that. And there are some places in the world, like New Zealand, that are probably in that position right now. They've had a recent outbreak, but it's small enough that they can probably contain it by conventional measures without a universal lockdown. Now, it still does imply the social measures like social distancing and mask wearing. So this doesn't get you out of that, but it allows those kinds of measures, along along with targeted, precise interventions, to contain the virus and allow you especially to gradually reopen. So that's the green zone. The yellow zone in between is the kind of highly uncertain. You could get it right and move down into the green zone, or you could get it wrong and move up into the red zone, where you're beginning to lose control. Up there, you do not have the option of opening there, you do not have the option of precise intervention. You have to take much broader measures that, for example, from time to time lead to shutdown. So Australia was a perfect example that they got it under control early, and then they had a significant outbreak in Melbourne. They didn't shut down the whole country, but they shut down Melbourne. And that is probably going to be sufficient to contain it. So those are the kind of dynamics that we're going to talk about. Are you in the green zone, the yellow zone or the red zone? And what are your movements? It's also the case that what's happened in the recent past influences strongly what's likely to happen in the future. And what we've seen is highly diverse responses all over the world. So we're going to be talking about different responses and different dynamics in different places. Okay, so what we've seen is mostly in Asia. A few countries did a good job of containing the virus. China, Japan, New Zealand, South Korea, Taiwan, Vietnam. They've all had some outbreaks since then, but in each case they were down in that green zone and they've been able to mostly contain it. So as long as they're able to do that. This is what we have called the dance. And in fact, to think about this, we've relied on a paper that has had a great deal of impact all over the world by Thomas Puyot, called the Hammer and the Dance. And the hammer was that first phase where we had to slam things down, really massive shutdown. And that happened because we really didn't know what was going to happen. Now we've learned a lot and we first of all know that people won't go for that hammer again, that is, they won't accept the universal shutdown. But we've also learned how to be much more targeted, either in geography or particular locations, etc. That need hot spots like military bases or prisons or retirement communities, etc. These are places where we've seen massive outbreaks and so those places you want to target. And so we're mostly out of the hammer phase in most places, not everywhere. And we're now into what Pujol called the dance, what you have to do to dance with the virus to contain it. And here we see three fundamental elements to that dance. Step one is keep it out, restrict travel. Island nations, island states can do that. Hawaii can do that. New Zealand can do that. Australia, an island continent, can do that. Most places have a very hard time restricting travel. The second is prevent infection. This involves all the kinds of things like masking, physical distancing, hand washing, public education. Now it may even involve dealing with ventilation and filtration as we have some concern about things like air conditioning. And then the final is containing it, if you have it. This is testing, tracing, quarantining, isolating. So either keep it out if it comes in, prevent further spread and contain the spread that happens, Those are the three elements of the dais. If you do that well, then you can probably keep the virus suppressed and gradually open up. So let's look around the world and see what's happening. Europe was very late to react, but it learned very fast. And so places like France, Germany, Iceland, Ireland, Italy, uk, all had big take off very quickly and most of them UK a little bit later, Italy a bit later, Germany, early, all reacted quickly and managed to get it under control and have pretty well kept it down in that green zone. Paris just has had a significant outbreak. They've required mask wearing all over the city. So the focused interventions still work for most of Europe. Some countries moved a little bit too fast. They opened, they had a big takeoff. Very quickly they suppressed the virus, they kept it down, but then they opened too soon. Like Spain, for example, which is now having a major outbreak. Same with Israel, Serbia, Ecuador. These are other countries that had these kinds of phenomena. In other words, early success led people to be complacent. And that complacency led to changes in behavior that led to new outbreaks and large scale outbreaks. And that's the kind of dynamics that we need to make sure we avoid. Some had such a terrible experience at the beginning that they learned, and that was the northeastern states of the United States, New York, extremely so, New Jersey, Connecticut, etc. They saw a massive increase of cases and frankly deaths. And so everybody knew somebody who was sick or frankly had died. And so they have done very well at maintaining social discipline in containing the disease, in mask wearing, essentially all the social measures necessary to contain. And also obviously cluster busting where needed. So what we saw is early failure led to later success. Other states, on the other hand, did very well at the beginning and then they got complacent. My own state of California, that was true. We were very pleased with the early success. And then people started going to the beaches, kids at university started to go to fraternity parties and so on. In fact, I drove across the campus of UC Berkeley yesterday and there was a big sign that said, don't go to parties. And walking by the sign were four young women without masks on their way to a party. Very dangerous, very hard to maintain. And so Arizona, California, Florida, Texas, South Carolina, early success, later failure. And we now have a serious problem. They ain't dancing very well. They probably have to do a fair amount of hammering to get it back down. And in the developing world, they're just seeing the takeoff. There are very few constraints. They're being hit very Hard, they don't have the health resources, the communication and engagement resources. So places like Brazil, India, Mexico, South Africa are all experiencing huge outbreaks. And there the uncertainty is quite profound. So the point is simply this. We see very different dynamics in different parts of the world where early success lead to later failure, early failure led to later success, and those learnings and experience are shaping the future dynamics. And what we've learned is something quite fundamental about how the interplay of these various forces work over time. What we see is what we call a kind of policy trilemma. There are three fundamental goals that want to be pursued at the same time, and getting the balance of those right is what's critical. The first is obviously protecting public health, but you want to get the economy open as quickly as possible, and you'd like to do both of those while protecting social values like individual liberty and privacy. And so the challenge is, how do you get the balance of those things right? So when you're focusing on initially at the public health side, you're willing to accept in many instances, some constraints on social conditions as well as economic consequences. But over time, this becomes a bigger and bigger challenge. The pressure to open up, the pressure to minimize the social impact is really quite profound. And so what we see is a huge variation in very much dependent upon social conditions as much as conditions with respect to the virus. The second set of goals has to do with the economy. And here you want to get recovery, but the only way to do that is if you're down in the green zone. Countries have done a reasonable job of providing stimulus. We'll see if it continues. But what we see is an enormous economic impact. Many industries being very hard hit, small business devastating, restaurants and other services enormously impacted. So this is a profound issue. And social cohesion will be impacted by the economic consequences of massive unemployment and poverty that is resulting. And so the third aspect of this obviously is the question of basic social values like liberty and privacy. And you know, at first it was an emergency and people were willing to accept a bit more than they would today. China, they could do it whatever they wanted, because personal liberty, frankly, is a non issue. But what we've seen in some places, especially United States, is a kind of pushback against essentially what people perceive as authoritarian measures. And I think this is extremely difficult. So how do you manage these three different concerns at the same time of health, economy and values and social conditions is actually the fundamental challenge going forward. Okay, so let's now see what kind of scenarios are actually visible from where we are today. Well, the first scenario we see is what's called stamping out the hotspots. Name says it all. This is a scenario based on the fact that you can identify those hotspots and target the interventions and minimize the economic and social consequences. And so what we see are number of places that have done a pretty good job of maintaining tight control and as a result are beginning to see a fairly rapid rebound on the bottom of this graph, the GDP loss. And they will begin to return to near normal soon. By that I mean sort of the next six months, call it first, second quarter next year. And I say near normal because until many more people are returning to a full economy, even if you're doing okay, your neighbors may not be. If you're New Zealand, you trade with the world, you sell and you buy with the world. If the rest isn't buying and can't sell to you, you may be subpar. So what we're seeing is until you really get a more widespread opening, everybody will be just a bit below, no matter what. The Economist used the term the 90% economy, and I think that's fairly apt, basically saying 10% goes away immediately. The question is, does more. And on the other hand, it does create room for new opportunity as well. So the first scenario is what we call stamping out the hot spots. And the best case is early establishment of tight control and maintaining it. However. Oh, oh, the places that obviously have done this very well are New Zealand and that's where New York is now. Their early catastrophic experience have led them to maintain tight control. But there's a second variation on this scenario, and that is for those places that frankly have not done as good a job of making maintaining tight control. And we've seen some degree of resurgence, not out of control yet, but still having to struggle to maintain it. That will slow down the rebound. You can't open up as fast. People can't come out of their homes, go back to work, go back to the stores, go back to restaurants as quickly as possible. So that stretches the time well into the second half of next year for the economic recovery. And if you think about, say, Japan or. And France are probably in that category, they did well, but now they've got a number of outbreaks. France is struggling a bit, so they've had to shut down some of the part of southern France. So you'd say that, yes, they're still in that green zone, but they're at risk of moving out. And they're right at the edge in that yellow space. And they still can come back, but they've got to gain control. So high degree of uncertainty in those places. The second scenario we call beating back the spring. And this is a scenario where basically you have imperfect containment, where you've got essentially more than hot spots. You've got large areas that are really out of control. And you can bring back some places, say in your country, but not everywhere. So you've got partial gains. This stretches the recovery time well into next year. And what we see are places like Spain and say state of North Carolina are like that. Spain had a big outbreak at the beginning. As I said earlier, they suppressed it, but now they're seeing major outbreaks and they're having to take much more aggressive action to contain it as well. So that's the second scenario. But there's another version of that where essentially you really let it get out of control. That is that imperfect containment leads to losing control and you end up with the economic consequences being much worse. Instead of the gradual recovery, what you've got is another major downturn next year, a second recession, more of a double dip recession, if you think about it that way, and it's pretty severe. It's important to understand that what we're talking about here is a very dynamic situation. And that's why we're talking about in terms of how people respond at each stage along the way will shape the next stage. And then the countries that fit that are places like Indonesia and the state of Georgia in the United States. And then the final scenario are places that have never really managed to get it under control at all, where it really is burning out of control. This is a scenario of wildfires raging all over the place. These places are in what amount to a depression. They are not going to come back anytime soon. And you start thinking about places like that. Florida, Brazil, completely out of control. Florida rises and falls a bit, but it is still way out of control. The measures are completely inadequate in the state of Florida to deal with things. Now. They could get it under control and that might be the second variation. Maybe the extremity of it might lead them to find their feet, get things under control before the end of the year. Doesn't seem to be happening in Brazil at all. So you think about a couple places like Chile and California. We still have the option of getting it under control before it really rages out of control. Statewide. We've got a big problem in the Central Valley in Southern California, not nearly as bad in the Bay Area. So that's fundamentally the question. Will the economies Come back. Well, if you come up from below and you get it under control, you have a chance of recovery by mid year, next year. But if you lose control, we're talking a depression. And indeed if many countries lose control, then we're really talking about a worldwide depression. So when you think about all of these scenarios together, what this points to is persistent uncertainty. That is, we're going to be in a very uncertain environment for at least the rest of the year. We won't really know what's going to happen with respect to the health care crisis. We won't really know what the consequences of the economic crisis in the US if the Congress doesn't come back till September and doesn't pass the stimulus until late September, the effects won't be felt until well into the fourth quarter. We also have a big election coming up. So the uncertainty here is enormous and will be persistent. And that uncertainty in turn leads people to be a bit more restrained. They don't spend, they don't go out, they don't do nearly as much, they don't go back to work nearly as fast. So all of that uncertainty is itself to some extent debate. But there are better scenarios than worse scenarios. It is not implausible that where you live and work may be in one of the better scenarios of stamping out the hot spots. On the other hand, if you're in a scenario of essentially unconstrained wildfire, you better be prepared for the worst. So need to think about multiple scenarios and how your particular industry, geography, community may begin to develop. So the other big uncertainty has to do with the virus. You notice that we did not cover the virus in the scenarios because there's fundamental uncertainty with the virus, with the vaccine itself. And so the question really is how that plays against the other scenarios we talked about. And the three big uncertainties with respect to the vaccine are first of all, when will we get it, Will it work, how effective will it be? So will it happen sooner or later? Obviously a lot of effort is driving us toward sooner. But this is a hard biological problem. We've never developed an HIV vaccine. It may take many months or even years or never to develop a vaccine. So the timing of the availability matters a lot. Secondly, will people take it right? You know, and I'm not talking about the anti vax movement, but a brand new vaccine that has rushed to the market is going to be challenging for many people. Would you give your kid a brand new vaccine that has not, maybe not been tested adequately? So there will be only a slow rollout so even if it's a reliable vaccine, people are going to be slow to want to take it. And then finally, who develops it and provides access may matter. That is, if it is open to everybody, it's fairly available to anybody who wants it, that's one thing. But others are using it for political purposes. China, Russia, United States, any of those could. Then we get into something very different. So we looked at three possibilities. What we looked at was what we call fever dream. And this is a scenario essentially of the vaccine is available early, people are willing to take it and it's available to everybody, it's fair. That would mean a fairly early effective response and would improve the likelihood of one of the better scenarios. On the other hand, while it might be available, people might be reluctant and you might have political issues determining whether it is available to whom. And then finally, it may take a long time to get to a vaccine may prove to be an extremely difficult and it may be slow to get into people's hands and people to take it, and it may be politically charged. So the vaccine itself introduces another fundamental dimension of uncertainty. So where is this going to take us? To the world beyond the crisis? Well, one of the things that we have seen that's really quite important is that different sectors of the society, of the economy are having very different experiences. There are some parts that are still growing reasonably well, frankly. Our business is much of enterprise, software is, but much of healthcare, you know, hospitals that had to put off elective surgeries suffered some, but they're getting back. And the truth is that more generally healthcare is actually thriving and is likely to continue to grow. Online retail has obviously taken off in a big way. Government sector, we're having to shift more resources to the government, more happening there at the opposite extreme is obviously small business. It's been catastrophic, right? It's a human crisis for every single small business person and the people that work with them. Whether it's the cleaners on the corner or the restaurant in the middle of the block or the bookstore down the street, all of them are suffering. The hospitality industry, obviously. Hotels, theme parks, rental cars, all that transportation, right? Not too many people flying these days. So what we're seeing is a high degree of variation in the middle. Some are doing okay, like financial services, lots of demand for telecom, manufacturing, depends where you are in manufacturing. So what we see is some industries like that turquoise line, green line at the top, doing just fine. Others have taken a dip but are coming back. Others are in a long term depression like say hospitality. So what we're seeing is a high divergence in variation, not only by geography, but by industry. However, this is also a time to reimagine and reinvent. And indeed what we have seen is a number of trends that were true already before the pandemic have been dramatically accelerated by the pandemic. And obviously one of the most profound is remote everything. Right. I'm recording this from my study at home where I have been working for the last six months, as probably have all of you. So not only are we all working from home, we're buying from home, we're going to the doctor from home, we're learning from home, we're socializing with our friends on video from home. And so the technology of remote everything is going to expand. Look, all this technology was invented before the pandemic. And so we're using it for things it was never meant for, but it's going to get much better. All the tools of remote interaction, whether for medicine, for education, for retail, even for socializing, are going to radically improve. And this is an opportunity for innovation. The processes around it, how do you enable your customers, how do you interact with them, with your suppliers and so on. In this remote world of remote everything, that becomes a huge opportunity. The second was de globalization. Look, we already had a trade war and challenges to the US China relationship before, we had issues with Europe and the US and so on. Now people are, because of the pandemic, looking for much more resilient supply chains, things that will not be affected by pandemics. And so we're seeing a lot of realignment like that going on. And I think that presents a second set of opportunities. Third, sustainability. Look, sustainability has been an issue for a very long time, but the pandemic provides some unique opportunities. We're driving less, flying less, consuming less and so on. What does that tell us about what we really need to do? It'll be a long time before I get on an airplane to fly halfway around the world for a one hour meeting. You know, this isn't that bad. And I don't mind missing eight hours a week communicating, commuting to work. And so we're learning a lot about how we could live to be much more sustainable. And then finally, all of these things require a digital transformation, moving almost everything into the digital realm. And so what we see, not only in our business, but nearly universally, is everybody is thinking through how to operate and live in a digital world. So all of those things together enable an enormous opportunity for reimagination and reinvention to provide new products, new services, new ways of doing business, new ways of interacting, ways of doing it in a much more resilient and sustainable fashion. So I think those challenges and opportunities also should be in front of us, thinking about how we can build a better world out of all this, not simply have our heads down and write in light of the massive impacts of the pandemic. So I don't mean to minimize the consequences. This is a human and painful crisis for nearly all of us. But there is hope beyond the crisis, and there's an opportunity to build something far better in the years beyond the pandemic. Thanks for being with me today, and I hope you will all be well and be safe. Thank you.
