Has the Commute Economy Peaked?
- 26 April 2020
- Faris Mali
26 April 2020
Has the Commute Economy Peaked?
At the 2017 Berkshire Hathaway AGM when asked what the biggest economic threat to his company and holdings were, CEO Warren Buffett’s response was a surprise, automated vehicles.
Warren Buffett has over the past decades invested in insurance companies; when there is a collision involving a vehicle there’s a confluence of activity that follows. A tow truck removes the vehicle, the site is cleaned up, insurance company receives a call, panel beaters are then contracted to repair the vehicle.
After several million miles of testing automated vehicles have proven to be exponentially safer than human drivers. That ‘crash economy’ that Warren Buffet has invested in would therefore see diminishing returns due to, thankfully, safer roads. As he himself stated:
“If they make the world safer it’s going to be a very good thing, but it won’t be a good thing for auto insurers’
The COVID19 environment has led most of the world to work from home. It’s too early to determine the long-term effects on our global economy, yet potentially it is highly we are witnessing a depression in the ‘commute economy’
New Zealand is entering its fourth week of self-isolation. Some of us have been very fortunate to continue employment from home (zoom subscriptions went from 20 million to 200 million in less than a week). One of my colleagues mentioned that her husband’s boss found his team to be far more productive since self-isolation began. He’s already decided that even when lock-down is lifted that his staff will continue to work from home.
From an employer’s perspective by eliminating a central office space he is cutting out his largest overheads, commercial rent and affiliated utilities.
But what are the knock-on effects?
Driving from home to town appears a mundane routine, yet there’s a whole economy dependent on us doing so;
Mechanics (more driving, more servicing)
These industries, already suffering, may never see the same level of turnover they had experienced; 2019 could have been the peak for these industries.
That’s just the business involved by getting into your car, what about your financial activities when you are in town?
Companies that will be affected by a decline in the commute economy include private car parking venues, local cafes and restaurants, and that’s just private industry. Local governments revenue will dwindle as decreased traffic will reduce speeding and parking infringements.
Families could end up being a one car household, this will affect both private (diminished car sales and insurance policies) and government (registration fees) revenue.
They’re the potential losses but what are the gains? Well we are already experiencing them.
De-congested roads have decreased greenhouse gas emissions. It was reported that in the northern Punjab province of India for the first time in decades the locals could see the Himalayan peaks as smog lifted.
Family time; though it has been incredibly frustrating for many families stuck in one bedroom apartments, removing the daily commute has allowed families to reconnect and (hopefully) do more than just binge-watch Netflix together.
Extra time; depending on where you live your daily commute could be up to three hours. That’s a lot of time you’ve just gained every day of the week. My former father in law once calculated that he had spent 6 months of his life in traffic just getting to work.
Efficient time. Post-industrial revolution we got into a habit of working 9am to 5pm. This is what led to congestion on the roads and open-office plans where essentially we created a world for extroverts (I highly recommend Susan Cain’s book — Quiet). I started writing this at 5:00am, early mornings is where I am at my best so by 2pm my creative flow is nearing exhaustion. Lately I’ve been receiving emails from people past 11pm, because they’re night owls.
We are not all 9 to 5 people; but we’ve been conditioned to be. This latest environment has allowed us to work within our personal times of optimal efficiency. This is not a revolutionary concept, Ricardo Semler wrote of this, and built a $200 million dollar business on the concept in the 1990s.
Now unfortunately this does not apply to all of us. I grew up in North Africa and as we’re seeing today not leaving the home is causing greater destitution among the world’s most impoverished. They need to leave the home to earn, lack of doing so will not only affect financial provision but also mental health to all generations living in the home.
We in the ‘developed’ (what we have developed is the ability to accrue more and more debt) now have a responsibility to adopt a paradigm shift. Out of this terrible disease that is hurting our most vulnerable people there is opportunity for us to create a far healthier world.
I was tempted to water down that previous statement because I’m thinking of my mechanic and the businesswoman who runs the cafe next door to my work, these are people I know that depend on the business of me getting into my car and driving to work.
Working from home should become an acceptable and encouraged alternative to those individuals and businesses it benefits.