Shirking from home?

Market report

The more serene summer tone continued in markets. The inflation debate gently prattled on in the background, adding to the sleepy feel. There was some fine-tuning of US rate lift-off expectations over the course of the week.

CIO view

The technologies that would come to bail out much of the economy amidst the pandemic have been quietly coalescing for decades. The arrival variously of high speed internet, video conferencing technology, smart phones and reliable, high powered, and inexpensive laptops meant less individually than they have come to mean collectively in the last year. ‘Where is work?’ has become one of the most important questions of our time. Added flexibility on where and when work happens relative to the pre-crisis trends is assured. However, how much more will have seismic implications for commercial property prices, the outlook for inflation and monetary policy, economy wide productivity and more besides.

From a productivity perspective, studies have so far proved inconclusive. What is clear is that we are now more productive working from home than we were (from home) pre-crisis, however it is early days yet. A normalisation of corporate real estate as new routines in the office/home work ratio begin to settle will be an important part of this. As we’ve observed before, it may be that this crisis has actually burnished the value of face-to-face interaction. The technology that has allowed many to move their office to their home would have inspired a religious terror in many of our forebears – what would the last year have looked like even if we had only been armed with the 1990 technological context? However, this crisis has also reaffirmed that much of the human experience cannot be easily replicated online. Offices will remain important in many roles. Part of that is the office as a place where knowledge can spill over between employees organically rather than at the call of a diary slot.

From some statistical perspectives, the 1930s was the productivity heyday of the US. Its most famously terrible period for economic growth was also on some measures its most technologically progressive. The confluence of several technological breakthroughs from the preceding years, even decades, was at the heart of dramatic changes in living standards over the first half of the 20th century. The contemporary advances in chemicals, long-distance communication, electrical machinery, structural engineering and aviation are often thought of as unrepeatably large leaps into the technological future.

Maybe. You could probably argue that a British person born in 1900 would have seen more shocking changes to the surrounding technological context in their first 50 years than a comparable person born in 1970. However, it lacks imagination to suggest that the best productivity years are certainly in our rear view mirror. For a start, the gigantic live experiment in home working, to the extent it endures, will have all sorts of interesting implications. We will only start to see more of any related (in)efficiencies once the rest of the infrastructure associated with work has adjusted to this new normal.

Some are even speculating about the positive societal and wider effects of facilitating this reverse brain drain. Could we see a welcome rehabilitation of some regions that over many decades have endured the loss of their brightest talents to the bright lights of the big cities? The answers are coming, but likely slowly. The evidence is building that this latest industrial revolution has already started, catalysed in part by the needs of this pandemic. If past is prologue, now is the time to be fully invested in a diversified batch of capital markets assets. The financial fruits of these advances will fall to, among others, the owners of the world’s companies – you, as soon as you take the plunge and decide to invest.

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