An intangible recession
In my first attempt at a blog posting I reflected on the loss of chance human social contact as a result of coronavirus restrictions (https://www.baloghblog.uk/post/coronavirus-and-a-loss-of-social-capital-from-thinner-random-interaction), something that is at the heart of my emerging “connections” manifesto for this blog as it starts to develop.
This thinning of random interaction clearly also affects the world of work.
A quite stimulating article was recently published in the Telegraph written by its Economics Editor Russell Lynch (https://www.telegraph.co.uk/business/2020/10/20/unseen-recession-threatening-grind-economy/). It is probably behind a paywall, but I think it is well worth viewing under a limited free articles scheme if it can be accessed that way.
In short, Lynch touches on several aspects of what is known as “intangible capital”, a highly nebulous set of things largely without physical manifestation but that fundamentally affect a business. He cites a study into prohibition era America that identifies an 18% drop in certain categories of patent filings with a causal link to reductions in social interactions.
Whilst for the hordes of WFHers there is already a stock of social capital and indeed customer relationship capital to draw on, the argument goes that this is gradually being depleted however effective the substitute of virtual interaction. Yes, we will all become better at remote interaction whether we like it or not, but it’s hard to imagine it will ever fully replicate the richness of face-to-face interactions, especially ones that happen by chance. And in an obvious extension to this, new starters are these days having to build up their social capital in a virtual way virtually from scratch.
I have a recent involvement with a virtual conferencing start-up and of course want to see it succeed in a marketplace that is accelerating hugely – on the face of it, the more virtual the better. But what is really interesting is to observe the young entrepreneurs behind it who are both enviably tech savvy and switch more or less seamlessly between physical and online interaction. The truth is this: the times we have made most progress have been those where we’ve been able to gather physically, traditional style, with backchat and quick-fire volleys immensely enriching our efforts to innovate. The company is positioning its products and services for what it is sure will be a hybrid world, not a virtual-only one, and the prospects are exciting.
But a warning shot from Stain Westlake, chief executive of the Royal Statistical Society, whom Lynch cites extensively in his article: “If you cancel ideas, the first thing you may know about it is when the P&L starts to suffer.”
Amidst all the unenviable trade-offs that government and other relevant authorities are having to make, even those that can be quantified are hard enough to balance. How easy it is to discount those intangible, unquantifiable dimensions that will only show indirectly and in the future, by which time countless apparently inconsequential encounters will be felt corporately and across society in their absence or, at best, through simulated but often less effective virtual means.
Every company leader by definition deals in the business of risk including those relating to its people, and its customers. For some, such as raw materials extraction and heavy industry there is rightly a central focus on occupational health and safety. It feels to me as if a new subcategory of occupational H&S may well make an appearance, one that implicitly or explicitly trades off the benefits of physical association against the consequential risks of contagion. At the moment, the government is pretty much doing that calculation for us, but I don’t think it can be that way forever. A company’s future may in practice, if not in theory, come to depend on it.