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Friday Thoughts

Labor Day weekend is finally upon us. In some ways, this has been the longest summer. Yet, in others it seems as though its flown by. I’ve spent a lot of time over the last few weeks thinking about things that have happened since Mid March, when the United States went into near complete shutdown. It seems like it was so long ago, but it was almost six months ago - half of a year. 

As I wrote about last week, we’re largely beginning to get back to life in this part of the world, but that’s not the case everywhere. I keep hearing people referring to some sort of ‘new normal”. I don’t like that phrase. If it’s “new”, then it can’t be normal for now. It only becomes normal when it’s been that way for a while. 

I prefer to think of things as the “next normal”. The biggest reason is that it acknowledges the fact that the world is always evolving. Things are always changing. I’ve heard some refer to it as creative destruction. The automobile put the horse and buggy out of business. Airlines caused the cruise industry to switch to being a vacation trip, rather than a people and cargo moving trip. There are countless examples of new innovations disrupting existing ways of life.

I thought I’d share some of my thoughts about what I’m expecting the next normal to look like. I need to place some expectations at the beginning of this, though. Please realize that my ability to predict the future pretty well stinks. I’m simply looking for trends. I also cannot mention any specific companies as being a good investment in a format like this. Everyones situation is unique. Their risk profiles and future needs will vary, so I can’t give investment ideas in a blog post. 

Let me start by saying that while I do expect a number of things to change over the next several years, a lot won’t change at all - probably a lot less won’t change than will. We still need to put food on our tables, clothes on our backs and educate ourselves and our children. The methods we use to do these things may shift and adjust some over time, but the need for these things to be done will not go away. 

What I expect to be the biggest change will be the way we work. The modern American economy has shifted from a manufacturing economy to a services economy over the last three decades or so. Amazingly, we are actually manufacturing more in the United States than ever, but with less people working in the plants and factories. This is due to increases in automation and technology. 

Farming has followed the same pattern as manufacturing. There are fewer farmers in the US than ever before, yet we produce more food then ever. Just like manufacturing, automation and technology are driving this. I have an uncle who is a farm manager in Illinois. He is hired by farmers and farm investors to help maximize productivity of their farm. He was one for the first licensed drone pilots in Illinois, as he uses his drone to fly over farms to quickly survey the fields and look for areas of concern. Previously done on foot, this was one of the most time consuming jobs on a midwest farm. Now he can do it in hours. 

My uncle is an example of how jobs have changed over to service industries, from manufacturing. He once farmed, now he provides a valuable service to farmers. 

We can debate all day long about the merits and the drawbacks of the change over to service jobs, but the reality is that manufacturing jobs are often difficult and tedious and it’s hard to find people willing to do that type of work today. I don’t see the trend shifting back. I actually expect it to continue. 

The way we work in a service economy has largely been similar to manufacturing. We’ve had large numbers of people in offices, often separated in cubicles, able to make or take phone calls and work on a computer. There have been recent trends of more open and shared spaces, but those have been the exception, rather than the norm. 

A quick aside - you may be thinking that there’s no one here that works like that, and you are probably right. But, there are millions in large and middle sized cities who do work like that. In more suburban settings, the offices are smaller, but it’s not that different for the local insurance agency or bank or many other service jobs.

These jobs have been the ones that have been easiest to shift to “work from home” (WFH) over the last six months. Many companies initially reported that productivity of their workforce hadn’t declined much with this shift to WFH. However, we’re beginning to see reports that productivity is now starting to decline, as employees are starting to miss the real interactions with others. 

Because of this, I don’t think we’ll see a total move over to work from home. Rather, I expect a hybrid model to become the new trend. JP Morgan announced an effort to do this for many the their employees last week. As reported by CNBC - Workers in the firm’s corporate and investment bank, an industry heavyweight with 60,950 employees, will cycle between days at the office and at home, keeping the ability to work remotely on a part-time basis, according to Daniel Pinto, head of the massive division and co-president of the banking giant.

I expect that as these changes become standard, companies will be rethinking the need to maintain large offices in big cities. Rather than 60,000 employees in a few towers in NYC, where rent and living expenses is as big as the buildings, why not operate out of a handful of business parks in places like Murfreesboro, TN and Topeka, KS and Ogden, UT. These are suburbs of mid sized cities, where living expenses are much cheaper, yet quality of life is just as good or better than NYC.

We’re already seeing an exodus of place like NYC and Los Angeles. Someone shared a video over the weekend of a line of people around the block outside of a Uhaul facility in LA as people waited to get moving trucks. I expect that to continue, probably even speed up. That will especially be the case if the local authorities cannot get a grip on the rising crime rates in these cities. Eventually, the only people that will be left will be the people who can’t afford to leave, like what happened in Detroit over the last decade. 

I’m expecting the move to remote technology to continue to develop. Before I opened Axis Wealth Planning, I had read an article about an advisor who was in Minnesota, but loved Colorado. So, he set up his business to be able to operate remotely. He now lives in Colorado full time, but most of his clients are in Minnesota. That idea appealed to me. Freedom! Subsequently, I tried to set up the systems that I operate on to be able to operate remotely, if needed. 

The reality of operating in that fashion wasn’t so easy, though. While most of the software I use is cloud based and I have cloud data services, there are certain things that needed an office and face-to-face meetings. Financial transactions can be quite complex and require a lot signatures. Certain software didn’t talk to others, requiring printing and scanning of documents. It’s a paper intensive industry, making remote operations tough. 

Recently, many of these issues are being addressed due to the Corona Virus pandemic. More vendors are agreeing to accept DocuSigned forms and companies are welcoming the idea of working with each other to integrate their software. I expect that this will continue. 

We’re also seeing artificial intelligence (AI) working its way into things. For a number of years, the financial media was all abuzz about “robo-advisors”, which are web based programs to help investors create portfolios at costs that were perceived to be lower than traditional advisors. The news has been more quiet about them as of late, as clients appear to want to talk with an advisor during periods of market volatility, rather than check in with a phone app. I see these robs-advisors being an opportunity for advisors such as myself. Perhaps I can utilize them as a portion of what I provide to clients in the future and let that AI work for me and my clients, while I’m here to walk the clients through the difficult decisions about their financial lives. 

Lastly, for today, I expect education to look different. I’m no expert here, so I can’t say what it will look like, but virtual learning has a lot of parents paying closer attention to the way their children are taught  - and the way they learn. I wouldn’t be surprised for the idea of school choice to gain steam. I also think that Higher Education, especially four year schools, will have to rethink their offerings. If there is a high likelihood of having to do remote learning at some point in a four (or five) year span of a students attendance, will it be worth it to pay the premium prices some of these schools charge?

While the forced closing of much of our economy due to the Corona Virus has been devastating to many people, businesses, and industries, we will rebound. I was told as young man, working on Mr. Kenny Schneider’s produce farm, that tough times would come. He used to always tell us that good times come and difficult ones, too. He always added that new challenges simply meant that there were new opportunities coming. 

If you are one of those whose employment has been affected by these closures, I would suggest you think carefully about what skills you have, or need to have, to survive in the next normal. What could you do to prepare for people having to balance work from home and work from office? Can you help build real home offices? What products or services can you come up with or sell that will help people transition to suburban life from the urban one? Is there a way to capitalize on the need to help families with remote learning?

Please remember, the world has always worked in cycles. The sun comes up and the sun sets. We have Spring, Summer, Fall, and Winter. When you are down and feel defeated, good days will come again. If you need help dealing with anything during this time, please know you are not alone. Please, reach out to someone and ask for help. 

I’ve taken too much of your time. Have a great Labor Day weekend!