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COVID-19 -

Emergence of the Decentralized Economy

May 2020


From an initial outbreak in China in late 2019, the COVID-19 contagion began its inexorable spread from the Far East to Europe and North America in January 2020. Within a matter of weeks, the virus was a pandemic and had touched virtually every nation on Earth. 


In response to this unprecedented attack by an unseen foe, Governments responded with hitherto unprecedented measures, shutting their borders and telling their citizens to stay at home for the foreseeable future in order to contain the spread of the virus. 


The result has upset the employment economy, forcing millions into unemployment and the remainder to work from home. For the time-being at least, those fortunate enough to still work remotely are still expected to attain a level of daily productivity equivalent to normal working practice as their employers continue to pay wages and salaries despite the restrictions imposed by government in the wake

of COVID-19. 

2020 may therefore be seen as a trial run for the largest global “work-from-home” experiment ever conducted and an interesting paradigm for the type of disruption such a trend could bring to the global economy: in the midst of this uncertainty, will business evolve to capitalise on this rare opportunity and adapt to the new normal, potentially cutting overhead costs and driving bottom line growth? In this article we explore some of the potential winners and losers in the pandemic economy. 

Communications Protocol 

For centuries, meetings between people have been the key to the human decision-making process and the meeting room has taken on an almost religious significance in many sectors and industries including education, medicine and pharmaceuticals, media, and politics. With the current social distancing trends, key players in businesses are no longer allowed to be in the same room together which has seen a commensurate rise in the use of video conferencing tools.


While video conferencing has been around for at least two decades, ever since the launch by Logitech of webcams for 56kbps modems in the late 1990s, improvements in bandwidth combined with innovations in hardware and software have seen a proliferation of video conferencing in recent years. 


Requiring minimal equipment and enabling large simultaneous international connections, recording and even instant note-taking, the simplicity and immediacy of video conferencing has seen key players such as Zoom, Cisco and Microsoft becoming overnight heroes of the pandemic. Zoom’s share price and user growth have exploded exponentially while Microsoft's free Skype and Microsoft Team software have actually held the company’s share price from falling. Similarly, Cisco’s WebEx, boasting its excellent security protocols has bolstered its declining market share and value. 

Privacy Infringement 

While video conferencing has allowed companies and individuals to continue collaborating in a virtual meeting environment, this new paradigm has exposed significant issues around privacy. Zoom, for example, fell dramatically from grace owing to two unforeseen circumstances: security flaws allowed meeting rooms to be infiltrated by uninvited guests who were able to record and post private information on public social media channels while the routing of data to China has raised significant concerns regarding privacy. The unintended consequence of these failures has been a simultaneous global economic and legal challenge to Zoom and to other similar platforms. 

Remote Working software

Citrix and VMware’s remote working environments and the virtualisation of office equipment to be easily accessible from the comfort of workers’ homes and mobile devices has seen a streamlining and simplification of the working environment, allowing users to log on with secured devices to their office equipment and data from their kitchen counters. Both companies have seen a generous growth of over 20% before Q1 earnings concluded. 


Any industries moving people from point A to point B have suffered a  massive decline in their profits. Uber’s biggest customers in New York, Tokyo and Paris are all working from home with stay-at-home orders in place, resulting in the decimation of revenue and driving the company to an all-time low of $14.82 per share. 


Train and subway companies are also experiencing minimal revenue with the majority of their staff being furloughed until the situation clears. Furthermore, the likes of UPS, DHL and TNT are feeling the strains of declining revenue for deliveries. Amazon had to officially close its logistics business in April 2020. 


Cloud Kings 

Salesforce, Amazon Web services, Microsoft Azure, Workday and Adobe cloud products have become essentials to small, medium and large business seeking to make a decentralised office set-up work. Increased bandwidth and user demands have driven a commensurate uptick in licence purchases. This has built momentum for the provision of capital to expand farm cloud system architecture. Hardware companies such as AMD, Nvidia and Intel have also seen a large increase in demand in line with the dramatic growth in cloud computing demand. 

Commercial Real Estate 

Hitherto lucrative REIT returns have seen a large downturn with the decline in demand for office space and the non-payment of rent by many failing SMEs in the wake of the COVID-19 restrictions. Cities such as London, Sydney, Los Angeles and Dubai have seen more job roles being advertised as adaptable to working from home with many medium and large corporations simply opting to reduce headcount and save on office space. Innovative companies such as WeWork may fold as demand for physical interaction in remote offices declines.

About the author(s)

Alex Koh is an independent analyst, writer, and economist. Harold Alby is a managing director and chief operating officer at Inova Capital. Justin Inniss is a managing director at Inova Capital.For more details on our insights please get in touch with us at Inova Capital AG on +41 415616905. Inquire about our ideas and nowcasting capabilities.

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