In today’s episode, we go inside the board room for an overview of the current U.S. economic situation by Thomas Kilbane, a senior economist here at Prevedere, and three distinguished guests. Joining the conversation is Patrick Slattery, a former Big-4 partner in strategic transformation, Anthony Cioffoletti, the founder of a consulting firm focused on business technology alignment, and Evan Smith, a former operating executive in chemicals, financial services, and tech. Patrick, Tony, and Evan have been interviewing executive leaders on their experience responding to the effects of Covid19 – as they build new futures for their organizations. They bring a wealth of knowledge and contribute to a dynamic Q&A session that illustrates the ongoing conversations Prevedere has with executives and board members across the country, helping to shape their strategic planning.
Patrick J. Slattery is a former Big-4 partner in strategic transformation who currently teaches in the Graduate School of Arts and Sciences at Fordham University in New York.
Anthony Cioffoletti is the founder of a consulting firm focused on business technology alignment, a former CTO of the largest reinsurance company, and a board member and advisor to cybersecurity organizations.
Evan Smith is a former operating executive in chemicals, financial services and tech, currently a change/ transformation consultant and executive coach.
Thomas Kilbane is a Senior Economist at Prevedere and works with businesses across a wide variety of industries to improve understanding of their external environment and how it impacts their performance.
>> Hello and welcome. You’re listening to Prevedere Connect, a weekly dialogue that explores the latest business trends to understand how companies are adapting and preparing for a stronger future. I’m Chrissy Wissinger, your host. Each week, we’ll be exploring trends in today’s business world, to learn how leaders, innovators, and changemakers are reshaping business to create a brighter tomorrow.
Thank you for listening in on today’s podcast, where we go inside the board room for an overview of the current USA economic situation by Thomas Cobain, a senior economist here at Prevedere. And three distinguished guests, including, Patrick Slattery of former Big Four Partner in strategic transformation, who currently teaches in the Graduate School of Arts and Sciences at Fordham University in New York.
Anthony is the founder of a consulting firm, focused on business technology alignment, a former CTO of the largest reinsurance company, and a board member and advisor to cyber security organizations. And Evan Smith is a former Operating Executive in chemicals, financial services, and tech. He is currently a change transformation consultant and executive coach.
Together, Patrick, Tony, and Evan have been interviewing executive leaders on their experiences responding to the effects of COVID-19, as they build new futures for their organizations.
>> So what I would like to do then is just to start with a brief overview, and I do wanna highlight a couple things.
It kind of the framework in which we’re using, I think with most of our customers as we head into the holiday season, and then, into 2021. I think you can all read the headlines, and so, we know that we’re in the midst of recession. What I think has been really most important in the framework that I wanna use right now to talk about where we’re headed in the future, is to realize that there are actually two things happening right now.
Two different major impacts, and we wanna separate these, because we think it’s gonna be really important for understanding that on how we see business going into the future. One is obviously recession, right? We’re in the middle of a recession. We understand that every recession is different. Certainly, this one is different, but at the same time, we see a lot of the similar things that we see in our recessions, right?
This includes consumer spending pullback, this includes job losses. This includes both of those things tide together, reduced production. All of those things that we see rush to safe assets in financial markets, and maybe a credit crunch. We haven’t quite seen that here, for the most part, but that’s a very normal part of a recession.
So a lot of those things are happening now, certainly, but one of the things that has made this so unique and so hard to track those components of it, is because, of course, the second big thing. And that’s the one that’s probably more front and center in the mind of most, and that is the health crisis.
So of course the health crisis is what launched us into this in the first place. But this is also made it such a unique recession, that I think it’s very helpful to think about these things differently, because it’s actually created incentives that are highly unique to this economic recession, and it’s made it very difficult to track this recession.
So it starts with the government lockdowns. So it plunges us all into into lockdown mode back in March and April, and things are forcibly shut. That’s very unique, right? That’s not a normal part of a recession. But then, it also includes this huge change in lifestyle for everyone.
People are now working at home. People are trying to do school from home. People are spending so much time at home if they realize they need to fix some things up. This stuff that they’ve been putting off for so long. This all actually creates a lot more opportunities than you would see in the normal of period of time when you’re entering a recession.
Of course, you’re not going to the movie theater anymore, but money being spent on streaming services is through the roof. So those kinds of things where you get the shifting and spending is a very unique piece of this. So if you’re a business and one of those pockets that has really benefited from this, the DIY home improvement type stuff.
Yeah, that’s not a normal. That’s not something normal that happens in a recession. We see the amount of money spent on pets. Everyone wants a pet while they’re stuck at home. That’s not a normal thing that happens in a recession. We mentioned the video streaming, the DIY products.
How about if you’re a manufacturer of sanitizer, or if you have any capability at all to manufacture sanitizer. Those kinds of things where we see this elevated demand that has actually driven spending, that we would not normally see at the beginning of recession. That is a unique piece of this, that’s part of the health crisis, not necessarily part of the economic recession.
But the other thing that’s been a huge story and made this way different, Then most other recessions is the government response, right? Without the health crisis portion of this, we highly doubt that we would have seen anything like the government policy response that we have seen. Now this of course includes monetary stimulus as well.
Central bank actions have been unprecedented, the types of markets that they’re playing in. But were especially talking about stimulus directly to consumers in the form of government checks. Of course, back in April, May and a little bit throughout the summer, but primarily upfront there. And then the enhanced unemployment benefits that came from the federal program.
And now we still see lingering that one expired the end of July. But we still see some of it lingering through state programs up to now. That has resulted in even though we are in a recession, in which employment as a proportion of the population is even now at the depths of the last recession.
We have actually seen the aggregate US consumer get a raise this year in 2020. And so that has resulted in consumer spending being way higher than we would ever expect given the strength of the labor market. And we have some really neat data coming from different places that allows us to draw some of these conclusions, and not just guess.
We’ve seen a really good report from JP Morgan Chase research arm that connects the dots between those who are receiving these enhanced unemployment benefits. We’re talking about an extra $600 a week on top of the normal policies would be. And by tracking their anonymized data from their customers, they can see the bank accounts in which there was a stop from the direct deposit from employment.
A start of these enhanced unemployment benefits, and they can measure the outlays and the difference across them. And we can see that the outlays from those who are receiving these enhanced unemployment benefits, they’re spending has actually gone up after they lost their employment. So this is a very unique piece of this that we’re putting in the category.
The health crisis, not just the economic recession. So we think about moving forward, but we really think it’s important to understand that these are two separate things, right? And that it’s entirely possible that the health crisis and all the things that have come from it, might actually come to a close at a different time or on different time frame than when the economic recession comes to a close, right?
Or the recovery. So we are starting to see a little bit of that in the data. Where some of these things that people have been spending on so strongly throughout the spring in the summer since the crisis hit starting to pull back a little bit in July in August.
And maybe just a little bit with the real time data in early September. If that is the beginning of the health crisis portion of this coming to a close, and what does that mean for the economic recession? If you’re a business that has benefited from some of these unusual things that have been happening in the economy here up to this point, I think you need to be concerned about that and very careful about assuming that both of these things are on the same trajectory.
So that leads to a lot of questions. Of course, as we head into the holiday season of 2020 and then it’s 2021, but I’ll pause for a second just to get some thoughts on what you think about splitting these things into two separate events with two separate sets of impacts.
>> Thomas, this is Patrick Slattery. Thomas, it’s really interesting, but do you think it should go another level? And perhaps when we think of the stimulus impact, for example, that would certainly be impacting behavior in the in the US. But for large multinationals, they’ve got to consider economic impacts around the world.
What do you see in the data in that regard?
>> Yeah, it’s a great point. I do think that there is some portion of this that is actually global. The US was not the only one to go to extreme measures on the stimulus front. Japan pasted two separate stimulus measures about less than 8 eight weeks apart in April and May.
The US just happens to be one of those who went strongest, particularly directly to consumers relative to what they’ve done in the past. So we do see a lot of stimulus across the, particularly the advanced world. And so it is a global issue as well, but strongest, probably in the USA.
When you start talking about multi nationals doing business all over the place, you really bring in a totally different set of issues into the equation, right? You’re talking about breakdown of supply chains. You’re talking about recovery is happening from the health crisis at different speeds. And then a reduction of trade, right?
And the rest of this Geopolitical stuff that’s going on and all that sort of thing as well.
>> Thank you. I’m thinking as well, you’d mentioned some changes in buying habits under the health crisis with respect to movie theaters being quiet but streaming being busy. We’ve seen in, certainly in business settings we’ve seen some trends that had already existed being amplified, and it looks like many of those trends will continue beyond the health crisis.
Do you see some of that in consumer buying habits as well? Things like a shift from perhaps for a certain demographic going to bars or restaurants versus liquor stores being busier. Any of that that you see trending to indicate different buying habits by demographic group, post the health crisis?
Yes, well, I guess I think one of the biggest surprises that we’ve seen up to this point is that those things have stuck around as strongly as they have. And I think that that is our first indication in the data that these things are going to have more, it’s going to take longer to get back to quote, the normal behavior for consumers.
The initial lock down maybe is what, the closure of restaurants, the closure of a lot of retail locations outside of what was deemed essential, was really what spurred this, but now that we see that in most places, particularly in the US, and most places are free to open now and operate with at least some capacity, we still see that grocery store sales are way elevated.
That has not gone back to even close to what we would have expected before, so it does seem now like there’s going to be a lot longer tail to a lot of this behavior. And the other thing that I would say is that in many cases this is actually sped up trends that were already going to be happening or were already underway.
So the rush to the online sales, the e-commerce stuff. That was already happening, it’s been happening, but this all of a sudden plunges new industries that maybe have been laggards in that with e-commerce all of a sudden up the curve. So that’s the kind of thing that has been accelerated and is likely to not go away either.
It just shoots them up on a new shelf. So a combination of the two where one is, some of these things we do expect to go back to normal, we expect people to still enjoy going to bars in the long run, but I do think that throughout 2021 that there will still be a slow comeback to what we consider full capacity.
>> Right, it seems there’s certainly a lot of heavy lifting for marketing folks as they, you’d mentioned going back to normal. I think in many sectors it’s a question of what will be the new normal and how marketing folks figure out what new buying behaviors are by demographic group within the new normal as it starts to gel.
>> New question, new question.
>> So, so this is Evan and I’m delighted to have the chance to be here with you. I’m intrigued about the the way, Thomas, that you’re talking about the return, I’m sort of queuing off of Patrick’s comment, use the word coming to a close with regard to the health crisis.
I guess the questions that I’ve been wondering about and hearing from people, hearing concern for people on, relate to the the hot spots that keeps flaring up in various places. Both sort of immediately from the point of view of virus testing, but also what the subsidiary or follow-on effects are going to be as for example, the government response now sort of winding down and what the impact will be.
You mentioned restaurant closings but as we might begin to see, for example, evictions, and what will happen around those sorts of trends. It looks, from the perspective, I have, and look, talking with business leaders, it looks like a very muddy picture, it does not look anywhere near like a recovery or moving towards a recovery yet or coming back to normal, to the point that Patrick made.
>> That’s right, I think you’re right, and I think that’s where the biggest concern is, is that it does feel like the health crisis has been around for a little while now, that people have made some sort of initial adjustment, and we are certainly wondering where that New normal will shake out from a customer or consumer preference.
And from a shifting of preferences standpoint, we don’t know exactly. But then you talk about the consumers ability to pay, right? To actually pay for the things that they want, even if their preferences settle on a new normal. And in that respect, now you’re talking about a lot more standard recessionary type stuff.
And the scary part is that there’s a lot of pockets of the data that really tell us that were in the really early, in the stage of a normal recession, right? And so that may create the feeling of a double dip, it’s certainly possible. Because this was not a very naturally happened upon recession.
We were all slammed into this health crisis together, and then you get the split between essential businesses and nonessential businesses that someone have to shut down and the other group doesn’t. But now you’re starting to see, well, okay, as the stimulus wears off, consumers have less ability to go out and pay for the things that they want.
You have the business stimulus that was really holding employment in some places that is winding down as well. And so a lot of areas where we expect actually employment loss to continue or even pick up in certain pockets. And the knock on effects that come from that too then create further issues that we would expect to see.
So we’re still classifying a lot of employment losses temporary, right? That’s also very not normal piece of a US recession either. As a lot of those temporary employment losses, more and more as they get turned into permanent, that changes consumer behavior and the knock on effects of how people choose to spend or not spend.
So yeah, I think you’re right. I think that it is concerning, the health crisis maybe gets better as we head into 2021, but we’re still left right in the middle of a big economic recession.
>> And Thomas, I don’t know if you saw recent statement by Bill Gates.
But his current view is that the direct impacts of COVID will be with what he’s calling the rich world through late 2021. And that for the rest of the world, the direct impacts could continue for a five year period or so until there’s natural immunity. So it almost seems we will be in different scenarios of the pandemic overtime, right?
And need to understand what markets look like under each of those, whether that’s domestic or as Bill Gates calls it, rich world markets versus rest of the world.
>> Yeah, no question, no question, there’s a tendency for this to play out very differently across the globe. I think, aside from the health crisis, I think initially, the push toward safe assets drives investment and global dollars to some of the normal stuff, the commodities maybe or the US dollar.
I think as a recovery gets underway, if interest rates remain very low, that’s an opportunity for the developing world to receive investment. As investment dollars look for a return in a low interest, maybe even lower interest than what we’ve seen up to over the last decade. But yeah, you’re right.
If production is hampered, or if the virus is still causing major concerns there, then that could roil their ability to capitalize on that opportunity.
>> Well, we might not think of consumer buying behaviors that certainly could have a long term impact on supply chains. You mentioned the market and I’m curious, I’ve been watching the market and just scratching my head, wondering how disconnected is it from the economic reality of Main Street.
And given the stimulus package and some expectation of inflation, I wonder if what we’re seeing in either market increases or the market holding relatively steady, isn’t just indication that overtime the dollar’s getting cheaper. Are you seeing that in the data as well?
>> Yeah, I guess you’re right.
We’ve had our eye on this as well, a little bit perplexed. I think the main, at least it’s particularly US, but I believe Europe stock market as well has done very well. I think you see the ratio of equity indices to GDP is at a 100 year high.
So for us as economists watching the fundamentals, that is not sustainable. And so. Even from an earning standpoint, right? I mean, it doesn’t line up, it doesn’t match up. You do get a little bit more sensical if you pull the top stocks out, so if you pull Facebook, Amazon, Apple, Microsoft, and Google or Alphabet out of the index, it gets a little bit more sensible, right?
Those are the ones that have really benefited so much from sort of the stock market, what appears to be perhaps a bubble. But yeah, as you move forward, I think a lot of things are gonna impact the strength of the dollar, you kinda ended on there as we move forward.
The the strength of the US stock market just being one of those. But it does seem like the strength of the dollar has been very high that it probably has been a bit overvalued for a few years and so we’ve seen that pull back a little bit here in 2020.
But perhaps that creates a little bit more room to build.
>> Yeah, I agree, and I’m glad you corroborate some of my suspicions when you look at the data. And you mentioned the big players that are driving market indices. I wonder how much of not only the pandemic, but the combined impacts of the pandemic in the recession is affecting a shift in wealth or transfer of wealth.
And is it too early on to get a sense of what’s happening there? Are we seeing wealth become more concentrated or are we seeing it move to new players, what’s your sense there?
>> Certain demographics or certain slices of the economy, is that what you’re thinking about?
>> Well, and again, when you look at trends overtime, if you were holding a lot of General Electric or General Motors.
You may have gotten a rude awakening overtime of slow rude awakening, I suppose, with market cap of tech stocks just totally overshadowing what used to be considered blue chip stocks, right? So maybe that’s a lot of institutional holders, but do we have a sense as to what that’s doing to, yeah, breakdown, say by demographics or even country or regions of the world?
Are we seeing different parts of the world starting to garner more wealth, other parts of losing?
>> That’s a good question from a geographical standpoint, different parts of the world, is wealth transferring to different parts of the world? Well, I guess I’ll start on that. From a global perspective, I think the biggest trend that we see is a reduction in international trade basically.
And it’s certainly part of the happenings of 2020, but some of the geopolitical stuff has been pushed to the back. And we see this, the tech world is now unfortunately being forced into this US versus China and the world has to pick sides. That’s not really good for growth.
So that may create opportunities for certain countries to step in if there’s gonna be a separation there, they may create opportunities in some places. I think in the in the aggregate, most economists would say it’s not a good thing. I’ll shift though to say, where do we see wealth going from an organizational standpoint?
We’ve seen corporate profits be fairly healthy for a few years now, but one of the things that has happened here is that there’s such heavy government intervention, particularly in 2020. Anytime that happens, it really favors the bigger institutions. The ones that have the know how and the knowledge and the connections to really navigate that.
So that’s one thing if you look at mid-size and small businesses, I think they’ve had a tougher time navigating 2020. And as long as that remains the case, as long as public intervention is playing a heavy hand in the recovery, I think it’s likely to continue. From a consumer standpoint, I can almost see the writing already from next year, highlighting the difference, so we’ve seen it already.
But it’s very easy to see a scenario playing out where those who are able to work from home more comfortably and the organizations that are able to handle that are going to be able to recover more quickly, right? The service sector stuff is gonna come back very slowly, or more slowly than we thought previously into 2021.
>> Those who have been helped by some of these postponements of evictions and student loan forbearance. And all of these helped those who have benefited from the enhanced unemployment which is no longer gonna be there. That’s gonna be rough, it’s gonna be a rough go for those as we head into 2021.
And so, for some I think the recession will be a thing of the past. But, so I think it could create some more unfortunately, some more inequality there among those types of workers in the market.
>> Thanks, can I shift gears on an you Thomas and, you mentioned workers and I wonder how difficult it is nowadays to look at Labor Day.
Maybe I can break that down into three concerns I have. One, given the double or the dual impact of the health crisis in the recession. I imagine we’re seeing a lot of under employed individuals, right? Where they’re not necessarily unemployed, but there are in a job that that they would not have accepted in a healthier economy.
We’re also kind of the other end of that seeing efforts and I do work with folks in technology and cybersecurity, and we’re seeing a lot of rewriting of job descriptions. Eliminating the requirement for a University degree in many cases, where that opens the door to a talent that you might not have considered before filling some jobs.
And then finally with work from home or work from anywhere, I have to wonder what labor arbitrage is doing to all this, right? If I if I used to be dependent on a specific professional talent or skill set close to my headquarters office, but now it doesn’t matter where the talent is.
Do those factors and others make it really difficult today to get a handle on what’s going on with labor. Yeah, no question. I’m gonna come back to the first one here because I think looking at the labor data certainly is a slam dunk for us. It is what we do all day long, and I think that we have some interesting points to make there.
I am actually unfamiliar, so first I’ve heard about the your second point there of the changing of the job descriptions. Loosening up with some of the mandatory stuff, probably for the better, right? I would think that easier access to the labor market. Taking off some of those, the old school requirements would only be for the better.
The last thing that you mentioned. I guess, I think that is gonna be a positive. It certainly in the short term for businesses, right? It’s probably gonna reduce the office space costs right? As businesses trying to figure out how to more effectively manage that line item there. And then of course, if you don’t have to stick to labor within X miles of your expensive downtown office, then cost of living requirements probably go down.
And you probably get to be a little bit more efficient with your labor bill as well, not to mention, like you said, cast a wider net. You may be able to bring in some folks that you couldn’t look at before. Long term, I think the question is still very much unanswered right about what does this mean for productivity, with people not being in the office as much full time working remotely more all that sort of thing.
So, a lot of questions still there. But from the tracking of the labor data standpoint. You mentioned number one tracking of the labor data. That is, I think a big issue for us right now. Because you look at the unemployment rate, which I think our feeling is that the unemployment rate is probably that one of the most if not the most overrated economic indicator out there.
You mentioned right off the top some of the issues with under employment, that really doesn’t get captured in there. And that is very true, right? The number of people that are working part time, that would prefer to be working full time. Or that are under employed because they kind of have to stick in this job.
They don’t feel confident they go find a new one. All very valid. Also all very much part of normal recession though, right? What we’re seeing now is that in extra issue where you have people that are going straight from being employed, to totally out of the labor force.
Not even counted in the labor force at all, because they’re going into early retirement. They’re part of maybe part of the Boomer generation, say, you know what my job is being closed, or I’m being put on temporary layoff. That’s it, I’m done I was only a couple of years away anyways, there are not counted as unemployed because they’re not looking for work anymore, right?
So that does not count as part of the unemployment rate. Another big thing that we see is that this sort of huge, huge, unprecedented chunk of people that are out and we can’t even explain why we can sort of speculate. It’s a lot of people that are having to deal with child care or home schooling now, right?
That is a huge, huge deal in a lot of these places where children are not in school. You go from a two income household, you lose one income, but then you decide you know what? It’s not even worth it, because I don’t know what we’re gonna do with our kids anymore.
So there is a huge chunk of the population that are no longer counted as part of the labor force and therefore not showing up in the unemployment rate. So we have this unemployment rate that looks like it’s not all that bad. But I think, as I mentioned at the topic, if you look at employment as a just a raw percentage of our population, it is as low or lower than any point during the Great Recession back in 2008, 2009 right now.
So I do think that you really have to know where to look to get the right signals from the labor market right now. And it’s been really quite frankly, when we do look at in those right places, that’s one of the main things that gets us concerned about where we’re headed into the future.
And a lot of this consumer spending and stuff of 2020 feels like a sort of a short-term.
>> Thanks. Looking at the data you might think that it would be difficult for business leaders to hire, but then as you went through it, I thought, well, it’s a bit of a buyers market.
But part of the process needs to be understanding how it’s all different right? These folks have either dropped out for early retirement or quality of life issues, lifestyle issues, and under employed in all. Sounds like that’s part of, at least during this interim period where we’re dealing with the crisis, that’s part of the new normal shaping up what the labor market looks like.
Thanks for that. Absolutely, and last point there you mentioned is how many people that would like to work but don’t feel comfortable from a health standpoint. So if you’re in a high risk category and you’re concerned about being in the workplace and being surrounded, be put at risk there are a number of people that you can see in the surveys that are saying that you know what?
I’m out of the labor force now entirely, and I’m not looking for work until there’s a vaccine or until I feel more comfortable. So that’s another big group of people that we think is very unusual to this point in time as well. So yeah, absolutely, there are still headlines out there, right?
If you are Amazon, or if you were a Dollar General, or if you’re some Walmart, these places they’re hiring by the hundreds of thousands, right? So there are certainly a lot of winners in this whole thing, but certainly a lot of caution out there as well.
>> Thomas this is Tony, thank you very much for doing this.
I’m gonna try to frame a question that doesn’t seem so policy oriented since we’re looking at it from your standpoint as an economist and you’re the expert for net standpoint. But it seems like this is clearly a time when one size does not fit all. There’s plenty of times like that, but more so in this particular period, whether it’s an industry difference, it’s a regional differences, size difference, there are companies that have major advantages because they digitize.
There were large enough and they were able to work at home and work from anywhere labor force. And are also have the ability to have applications in the cloud they are set up to do this for instance, the financial services market, if you think 20 years ago and you wouldn’t think it taking a picture of a check to deposit to a bank.
So they’ve been able to be fairly productive even during crazy times, even we were going through March, April. But what it does, it creates more of a gap between the folks who kinda have, and the folks who don’t have. And from a company perspective, the people had the ability to have an organization that could digitize and could prepare for some kind of resilience, not knowing obviously the pandemic was coming.
But just to have some kind of business resiliency built into their operating procedures where the folks who are smaller, don’t have that ability or don’t have that wherewithal to do. From an economic standpoint, or from an economist perspective, how do you see overtime the smaller people catching up?
Whether it’s small in size or their left out because of the shift in labor force in there in the region that is not attractive to Have people living there or whatever the case is.
>> Yeah, you make great points. You know aside from being able to navigate the government policy and everything, that’s another fantastic reason why a lot of those big businesses are gonna be a little bit more resilient.
They have in a lot of cases, the bigger cash savings, right? The healthier balance sheets to number one be able to withstand a period of time with a decrease in revenue. You talk about small businesses, so many of them have to just close their doors if they don’t have any revenue coming in for 3 to 6 months, you just can’t with stand that.
But I think the big thing with resiliency that small or even mid sized businesses have on their side is really flexibility and the ability to move quickly into an opportunity perhaps more quickly than a large company. So if you can move quickly into as an opportunity and if we’re saying that winners and opportunities in this whole thing are actually easier to come by than most recessions because of the uniqueness of it.
I think that creates opportunities and spaces that are popping up that no one could have really predicted, that it creates opportunities for small and midsize people that are very flexible and able to move quickly to hop right into it, right? Someone like Zoom may have been well set up for that and maybe you think they get lucky or whatever in this.
But all of a sudden now Zoom gets valuation that puts them up as one of these pretty soon to be one of these tech titans, right? Instead of sort of a small players we would have talked about them. One of many in the market, a very crowded market just a year ago.
So I think that’s what you have to lean on and would be something to point to is that we have the ability to move quickly and be flexible into opportunities for small and midsized companies.
>> Thank you that makes sense here. We’re hoping that the smaller folks were a little more agile, they can adjust and I mean Zoom is a perfect example, right?
Who would’ve thought Zoom when you had Giants like Cisco and Citrix or the big behemoth in June. All of a sudden came out of his favorite at least for now, so thank you, appreciate it.
>> Thomas and Tony, that Zoom case is a good example of what Tony and Evan and myself keep talking about, how businesses can best drive through a crisis, right?
And so without slamming their competitors by name, there were other big players that had products out there that were fairly well received. And yet when the crisis hit, Zoom was able to thrive in the others not, right? Maybe they’ve played catch up they’ve certainly grown right, but nothing like the trajectory that Zoom has had.
Have you seen Thomas, anything in the data as this all played out especially in the last, say 90 days the last three months or so. Since the real troubles of March and April, anything in the data that really surprised you or just seems so counter intuitive, you had to go back and double check and wonder what was going on?
>> Yeah all the time and some of which we don’t know yet. We still tracking, one of the things that this has really made us pivot towards is real time data, right? So we in our world, there’s really only a few data points that, I mean I guess it’s been six months now, right?
So a handful of data points if you’re looking at a monthly data set which is kind of the monthly or quarterly type of data, it was the norm prior to this. That’s not good enough anymore, right? So we really have to pivot towards some of these high frequency things at the weekly or even the daily level.
I mean, obviously financial markets live in that space and always have. But outside of that we haven’t seen much of it. Well, now there’s a term towards that pivot area. We’ve certainly embraced that, and I think that one of the things that’s surprising, I don’t know if this is a positive or negative, but we’re certainly taking advantage of it.
Is all of a sudden there’s a lot of data out there that, I think was always had been collected prior to the crisis that people maybe didn’t want to admit. I referenced earlier this study where JPMorgan Chase is mining their own customers bank accounts, right? So that’s the kind of thing that kind of lived like in academic research corner of the world prior to this and now all of a sudden, people are relying on that sort of information.
We see these mobility trackers, right? Cell phone data, it was kind of taboo before the crisis now it’s everywhere. Everybody wants to know by the anonymized data that comes from cell phones, what’s my foot traffic like at these different brands? What’s my foot traffic like at these different stores, at bars, at restaurants, at airports, that kind of stuff, daily tracking of TSA.
Pull through right in the in the airports, that kind of stuff, that kind of stuff that we’ve had to embrace and allows us to kind of pull things out when we see things changing. I think that early on we were surprised we did not expect this health crisis behavior to stay as long as strong as it had.
I guess the other thing that we’ve done is we’ve really moved towards scenario planning. So instead of putting out to embrace the uncertainty that’s inherent in all of this. We’ve really tried to help our customers understand what life might look like for them and what their demand might look like under a number of different scenarios given the uncertainty.
And I think early on, it was really only are pessimistic scenario that really captured what has happened with the health crisis piece of this. The fact that spending at grocery stores is still so high, the fact that spending on home cleaning product, sanitizers and all that thing is still so high.
That was really something that we saw in our pessimistic scenario, right, playing out. So now that’s a reality, right now, it’s part of our baseline, but we’ve had to adjust for a number of those things that have surprised us.
>> It’s great time, good insights on all of those.
And I’ll tell you between Evan, Tony and I we live in the in the world of the CFO very often and that’s in large part driven by the bottom of the foundation of that whole pyramid, which is accounting, right. And accounting, is all about ticking and tying and everything reconciling.
And there’s always a struggle when you get to the senior leadership level to get people to think about scenarios and to think about data that doesn’t necessarily reconcile to the dollar. And it’s hard and in a circumstance like this, especially in a case where there is crisis and quick decision making needs to be made.
It’s hard to think you really can afford to have the time to take and tie everything and to rely on one set of things to think of the whole world is a trial balance and just make your decisions based on that data.
>> And this is Evan, I guess, even as a beyond a trial balance, just thinking of signals, information signals as Proxies or rough estimates or Guidepost site.
I’m reminded of a discussion with the CEO recently who said that they done away with their typical strategic planning, cadence and cycle, and they have moved to a rolling 90-day forecast. So they’re effectively recreating and they’re looking for the things Thomas that you’re describing. The real time data, the operational indicators, the feeds, the things that might have in the past been considered strange signals or unusual suspects in terms of information sources.
To help guide what they’re doing in the business. And I guess I’m curious I guess are there particular in addition to mobility data, which I think is a terrific example? Are there other specific categories for domains of data that you are seeing people looking towards for indications about how to calibrate their business.
>> Yeah, I think the mobility data is probably number one, but the really cool part about it I think is being able to break it down not just by industry or by type of location, but by region as well. So that’s one of the things I think we’re gonna be tracking moving forward as you mentioned, the global picture, right?
Certainly across the globe were gonna see I think, major differences already have major differences in how they’ve handled the health crisis and mobility. And which societies have been able to handle this a little bit better than others. But then, if you’re thinking about from a domestic US standpoint.
We think that we’re starting to see more and more regional differences as well, so that’s one of the cool things about the mobility data. But we’re also tracking other things at a daily or weekly cadence that will help I think us pick up on certain industries that are key, like travel, for instance.
So we think travel is key as we see people feel more comfortable with that and get back to that. That’s a sign beyond just the mobility thing, so I mentioned the daily tracking of TSA, right? How many people are going through the monitors each day? That’s one hotel occupancy rates get reported weekly, tracking that thing.
There’s some cool stuff out there where you can track open table is one that tracks restaurant reservations and you can track that in what we would. Consider close to real time, right, to see where those are getting back to closer to fuller capacity than others. So those are a bunch of different data sources that we’re going to, that we didn’t probably used to, that we’re using a lot of.
But overall, you guys are speaking our language now, right? I mean, we think in probabilities, right, we think in probabilities of the way that things can play out, and so I think that that’s really crucial. I think that there’s a lot of smart business people that can listen to NPR on the way to work or whatever.
Well, I guess now it’s not on the commute anymore. But you can listen, you can hear the indicators, right? You can hear the latest update, our retail sales is here, consumer sentiment’s here, industrial production is here. But the real question is do you know what that means for your own business?
And so we certainly live in the world of demand, it’s demand planning, and that’s really what we’re trying to do is connect that. If we think if there’s a range of outcomes, and we’re talking about probabilities of outcomes that could happen with a bunch of different indicators. If industrial production is here in 2021, what does that mean for your industry or your business or your specific product?
If we can look back and see a normal range of consumer sentiment recovery from prior recessions, then we can take a look at your data. And apply that to see what has happened to your category, you’re industry, or your specific product in the past and what that might mean for you in the future as well.
So just trying to help people connect that to their own business, product, category line, whatever it is, is really the important thing right now. And I think, really, again, remembering that the health crisis is not the same thing as the economic recession.
>> Well, Evan and Thomas, that really brings it home, I think, for a lot of the folks listening.
All this data, the underlying linear trend data that everyone was using out of accounting, you can throw that out, you can throw that out now, right? But you do need to think about this much more responsive use of indicators. And as you pointed out, Thomas, in the example from JPMorgan Chase, that’s not all external data.
There could be internal data to mine and include in that as well. So this was a phenomenal conversation, I’m glad we were able to get together with you, Thomas. I certainly appreciate it, and thanks, Tony and Evan, as well.
>> And that concludes our podcast. A special thank you to Patrick, Anthony, and Evan for a dynamic Q&A around the current economic situation in the US.
And to all of those listening in, thank you, and we appreciate you being here, have a good day.
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