This Friday we commemorate the 75th anniversary of Victory in Europe and remember the extraordinary sacrifices made by so many. As we commemorate the end of fighting, there will be many of us listening to the announcements of lockdowns being eased, that will dare to hope this might be our ‘beginning of the end’, but what does that mean?
Many of the parallels between wartimes and our current times are obvious. The US has already suffered 10,000 more deaths from COVID-19 than it suffered in the Vietnam War. However, some of the biggest changes from wars materialise in the decades that follow and are more subtle. They emerge in our communication, in our consumption and in our society. Given this important anniversary, it would be wise to look at history and reflect on how it might repeat itself.
Communication – Stay safe, furlough your avant-garde bikini, and don’t touch!
Our communication adapts and reflects the world around us. The words we choose, the medium we use and protocols we adapt are mercurial by necessity. Language is a perfect example. Phrases like ‘over the top’ and ‘cop some flak’ originated from the World Wars. Today, ‘stay safe’ has never meant so much and will be with us for generations, as will ‘furlough’ (a Dutch term for a leave of absence from the military). However, there will be more subtle words, like avant-garde (a French term for the section of an army that went first into the battle) or bikini (designed to shock, it was named after the atoll in the Marshall Islands where the US military tested nuclear bombs) which will emerge over time and whose origins will be overlooked by most.
Language is interesting, but we are told it accounts for only 7% of communication, with body language (55%) and tone of voice (38%) jointly taking the lion’s share. In this era of ‘no touching’ and the ‘two metre rule’, the video calls, emails and chat rooms are now the dominant mediums. Worst of all, we can no longer judge the handshake, the eye contact or the polished shoes. We are battling in the millennial’s digital swamp of instalies* and having to adapt fast – who can we really trust? And is our communication secure? Digital encryption has replaced face-to-face, enigma machines and wax seals.
I am not unique in the questioning and worrying. I regularly speak to heads of other family’s offices in London and never has there been so much demand for exchanging reliable professional contacts – from digital doctors, to lawyers and cyber security. Fortunately, I am not alone at Sandaire. Across our Family Office Services team, we work with c. 25 families and have a good first-hand knowledge of many of their networks of professional service providers. In this era of restricted communication, our network of tried and trusted service providers is proving an invaluable resource to “look over the fence”.
Consumption – The end of the era of ‘mass consumption’?
The American economist Walt Whitman Rostow developed the ‘Stages of Growth’ model in the late 1960’s and for much of Europe’s post war period we have experienced his era of ‘Mass Consumption’. Rostow argued that during this period societies would focus on expanding their external powers of influence, elevating their welfare states and significantly increasing consumption levels. Since the end of World War 2, plenty of economic and political unions have come, gone and been challenged. Progressive taxation has become normal and consumption levels have risen unabated. That is, until now. The fast fashion world is grinding to a halt, restaurant chains are breaking around us and there may be no low-cost airlines left.
What comes next? Rostow subsequently speculated that there would be an era of ‘Beyond Consumption’, which he also termed ‘The Search for Quality’. The Quality is hard to pinpoint – is it product, experience, environment, lifestyle, or even equality? We cannot know, but we’ve probably all made promises to ourselves about the items we will (or more likely won’t) consume when life returns to normal. A consumption transition of some form is likely to occur. Our investment team have been ahead of this and portfolio managers have shifted a lot of cheap ‘whole of market’ ETF exposures to active managers or sector thematic ETFs. The private equity and property teams are also being extremely selective about the opportunities they pursue. That’s not to say everything is doom and gloom, it is about being selective for the future. Radio navigation, penicillin, computers and jet engines were all born in the World Wars. Might Oxford Nanopore’s USB sized genome sequencer be the modern day equivalent?
Society – Has the Big Society arrived?
My parents knew their neighbours, but over the last few decades, you will have been most likely to meet your London neighbour over an aggressive Party Wall Agreement. Suddenly that all changed as COVID-19 arrived. Villages and streets have WhatsApp groups and over half a million people signed up as NHS Volunteers, the modern day equivalent of the Land Army. People are caring about each other and it is not limited to private society or their immediate communities. The online backlash against the Scottish hotel that (accidentally) fired its entire live-in staff, thereby making them homeless, in the depths of the lockdown was ferocious. Whether they like it or not, company boards are finding they must tread the tightrope between shareholder value and shareholders’ values. Our investment team have spent a considerable time analysing the advantages and challenges of sustainable and responsible investing. These events will only serve to accelerate interest in this area and we welcome dialogue on it.
Our societies have become spatially bigger too. I am writing this article from my cottage in the Welsh borders, while my work neighbour is currently in Ticino, Switzerland. The internet allows us to commute instantaneously. The remarkably consistent Marchetti Constant shows the historic expansion of cities correlates to their transport links. Workers are, on average, willing to commute c. one hour per day to work. Amazingly, this can be observed from pedestrian Rome in the 1300’s to relatively modern commuting in London. Post World War 2, the British government was most concerned with urban poverty and overcrowding and built upwards, with varying degrees of success. Today, it wants to spread the economic prosperity out of London. COVID-19 has kick-started internet commuting across the country and into the counties, and Mother Nature can breathe a fresh sigh of relief. Unfortunately, certain landlords will be sweating whether their tenants will ever return in the same numbers to central London. Three months ago, our real estate team advised one of the families I look after to stop pursuing a Mayfair office building as the bidding rounds were starting to look stretched and we would have no buffer. It eventually sold at c. 25% above our level and I wondered at the time if there was a chance we would look back with regret. Today we are 100% grateful for their advice.
Uncertainty – The best environment for family offices
Looking back at how our society changed post periods of war, we realise that it is extremely hard to predict the big shifts. We are likely to be at one of these pivotal points in time now and the exact shape of the future is uncertain. We all have our wish list, but what is certain is that doing ‘the same as before’ or applying a homogenous approach is unlikely to work for large or complex families. Adaptability and resilience will be the key to the next few years, and families need a dedicated team they can trust around them. Family Offices thrive in this environment.
* For those my age or older, instalies is a term that refers to the profiles on Facebook and Instagram seldom representing the real lives of people.