COVID-19: The Great Reset

I just finished another very good book and added it to my Book Library. COVID-19: The Great Reset was authored by Klaus Schwab and Thierry Malleret. Professor Klaus Schwab is the Founder and Executive Chairman of the World Economic Forum. He has argued that a company must serve not only shareholders but all stakeholders to achieve long-term growth and prosperity. To promote the stakeholder concept (something gaining considerable traction today), he founded the World Economic Forum. Thierry is the co-founder and main author of the Monthly Barometer, a succinct predictive analysis exclusively provided to private investors and some of today’s most influential opinion and decision-makers.

The book takes a close look at a post-pandemic world. Much as I have looked for the Catalysts that drive human action, the book explores the potential for COVID-19 to serve as a catalyst for profound positive change. A quote from the book:

Put simply: The Black Death may have been the unrecognized beginning of modern man. If such profound social, political and economic changes could be provoked by the plague in the medieval world, could the COVID-19 pandemic mark the onset of a similar turning point with long-lasting and dramatic consequences for our world today?

The authors explore that question with an eye towards a potential great rest. This reset would reveal itself across several dimensions: societal, economic, geopolitical, environmental, technological, and industry. In exploring the various aspects of a reset, the authors use history as a guide. History can be very instructive, and I find Many Similarities to our current day. In looking at historical periods that represent challenges similar to the current pandemic, the authors focused on the World War Two era:

World War II could be one of the most relevant mental anchors in the effort to assess what’s coming next. World War II was the quintessential transformational war, triggering not only fundamental changes to the global order and the global economy, but also entailing radical shifts in social attitudes and beliefs that eventually paved the way for radically new policies and social contract provisions (like women joining the workforce before becoming voters).

Others have used World War Two as the most relevant comparison to our current situation. However, so much has changed since that era, with polarization entrenched, and cooperation and collaboration lacking. That aside, the authors argue that the pandemic will accelerate systemic changes that were already apparent prior to the crisis. They provide a list of these systemic changes:

• The partial retreat from globalization
• The growing decoupling between the U.S. and China
• The acceleration of automation
• Concerns about heightened surveillance
• The growing appeal of well-being policies
• Rising nationalism and the subsequent fear of immigration
• The growing power of technology
• The necessity for firms to have an even stronger online presence

They then explore the possibility of going beyond acceleration and altering things that previously seemed untouchable, such as:

• New forms of monetary policy like helicopter money (already a given)
• The reconsideration/recalibration of some of our social priorities
• An augmented search for the common good as a policy objective
• The notion of fairness acquiring political potency
• Radical welfare and taxation measures
• Drastic geopolitical realignments

They position this great reset in the context of what they consider to be three prevailing secular forces that shape our world today: interdependence, velocity, and complexity. Our connectivity has both advanced human development and created an interdependent world in which all risks affect each other through a web of complex interactions. This complex web forces us to view everything at the system level, making System Thinking critical to understanding risk, implications, and paths forward. The authors state it this way:

When considered in isolation, individual risks — whether economic, geopolitical, societal or environmental in character — give the false impression that they can be contained or mitigated; in real life, systemic connectivity shows this to be an artificial construct. In an interdependent world, risks amplify each other and, in so doing, have cascading effects.

Velocity is much discussed. There is no disputing the speed at which our world moves. Complexity on the other hand requires greater attention. As the authors state, complex systems are often characterized by an absence of visible causal links between their elements, which makes them virtually impossible to predict. When we think of resilience and adaptability, we think of an ability to absorb shocks. These traits are difficult to realize, as behavior in an adaptive system is driven by interactions between nodes. The authors confidently assert that the pandemic (which they view as a high probability, high consequences white-swan event), will provoke many black-swan events through second-, third-, fourth- and more-order effects.

This Convergence across societal, geopolitical, economic, and other domains, determines our path forward, while at the same time complicates our ability to see the path. However, events like pandemics make many structural issues visible. In a post from 2018, I described a Great Reset as viewed through the lens of economist Tyler Cowen. In one of his popular videos, he talks about unaddressed cracks that form in a system. These cracks accumulate to the point where a reset is forced upon us. Many cracks were visible pre-pandemic, but they have now been amplified and laid bare for all to see. Our authors look at some of these cracks: geopolitical instability, lack of global governance, inequality, climate change, a relentless march of automation, surveillance, weak social contracts, and more.

Coming together to address these challenges requires coordination and collaboration. Yet, by focusing on history, the authors found that natural disasters, like hurricanes and earthquakes, bring people together, while pandemics do the opposite: they drive them apart. They state: “the examples of previous pandemics are not very encouraging, but this time there is a fundamental difference: we are all collectively aware that without greater collaboration, we will be unable to address the global challenges that we collectively face.”

I highly recommend the book. I will leave you with this from the authors:

In today’s interdependent world, risks conflate with each other, amplifying their reciprocal effects and magnifying their consequences. Cooperation — a “supremely human cognitive ability” that put our species on its unique and extraordinary trajectory — can be summed up as “shared intentionality” to act together towards a common goal.

Originally published at http://frankdiana.net on October 1, 2020.