Costs, Risks, and Resilience.
Those 3 words seem innocuous, but they, in reality, represents potentially the destiny of millions, if not billions, of people.
The Financial impacts of those 3 concepts determine the flows of the Capitals and the behaviors of the Human Resources inside a Company, defining the typical work routine, the investments in capital expenditures, the geographical presence, and the Management’s decisions.
A shift inside the expected risks, costs or resilence spectrum means a shift of the future scenarios for the macro and micro worldwide players, directly and indirectly.
Geopolitically speaking, this implies some advantages and disadvantages for the Big Powers, from a Market Size perspective, like the EU, US, and China.
For example, taking the first concept (“Costs“), it is possible to determine how the life of at least one billion Chinese People is changed, after entering in the WTO, since the Worldwide Companies tried to reduce the Costs thanks to the offshoring to Mainland China.
This made their life more dynamic, bringing this Country to become an industrial manufacturing market power, allowing the investments in infrastructures and the exchange of know-how both at industrial and academical level, generating benefits for all the actors involved.
Smarter and powerful commercial partners mean advantages for everyone in the world since the cooperative competition to reach innovation and research achievements, generate advancements in the scientific research that benefits all humankind.
But, with the arrival of a chaotical macro-economical and social scenario (like the Coronavirus’ generated one), the free market and the commercial exchanges could be strongly affected, reaching a prioritizing of the National orders (the exchanges stop to follow the discriminative Market Price logic).
Since reality is a function of the mind, consequently of the information and the ability to perceive them, the knowledge defines a new optimal logical framework, in this case introducing two new variables into the macro-actors decision process: the Risks and the Resilience.
In fact, the Companies now are facing the negative side of the pay-off of the low-cost strategy: the internal market is not able to sustain the Revenues, generating a crisis of liquidity and a disruption of the supply chain that can increase the likelihood of failure in this adverse market conditions.
In terms of generally expected valuation, from the financial perspective, basically it becomes much less convenient to offshore to reach cheap labor costs.
What companies are trying to do since the interest to reduce the costs is still persistent, is to increase the level of automation inside the Supply Chain production processes: actually the “all-in strategy” is made convenient by the crisis situation that reduces the perceived risks of failing in investing in the automation of cognitive tasks.
And Governments are more and more conscious of this: a series of incentives to “turn-back” can be expected, especially connected with 4.0 Industry policy programs.
The Companies that will survive after this period, in fact, in most of the cases will be the ones that will be able to reduce as much as possible the human intervention in the production process: and the Policy Makers will be ready to recept them inside their sphere of influence.
This, obviously, include the Companies that will successfully reshape the routine to make it works with Smart Working procedures: a condition that opens the doors for a New Automation era.
In fact, the beginning of automation starts with Data: if everyone only has as input a computer, every information and process can be measured and collected together with the results, making it in the next years easier to create Artificial Intelligence Algorithms, based on Employees past outputs (all available online), to automate the Human Cognitive Skills inside the Companies.
If an Employee can make it from a Computer, an AI can make it faster and better.
The most successful (and especially attractive) Countries, in a World that will be soon more automated, will be the ones that can count on Innovative local companies and individuals expertise, to generate the Cash Flows necessary to sustain the population, maybe with an educational income indexed to the skills that will be still in demand, before social crises generated by an increasing unemployed population will start.
In doing this, Innovation will be more and more important, especially in countries like China, where to survive will be necessary to increase the Population’s average salary (to be able to create a strong internal market) increasing the demand for new sources of productivity, since the manufacturing is likely to be reallocated worldwide, reducing China’s reliance on the Export.