The Covid-19 Pandemic and The Gig Economy
The hysteria is real, governments are ordering shutdowns, hospitals are flooded in parts of the world, unemployment is rising, the stock market is crashing, unemployment is on the rise, and 90% of people are quarantining themselves in an effort to stop the spread.
THE TRUTH OF THE MATTER
The truth is an economy has to run in order for there not to be widespread famine, sickness and casualties. It is not feasible to stay quarantined for months on end or even longer. There are 7 billion people in this world, and a shutdown would result in catastrophic losses. So while the government attempts to stimulate the economy by injecting money into it, this is only done as a band-aid in hopes that the issue that we face is solved relatively quickly. After all, the government cannot continue to inject funds into the economy without obvious drawbacks.
For anyone that does not understand basic math and simple economics let me explain why the government cannot just continue to inject funds.
HYPOTHETICAL SITUATION (That is not so hypothetical...)
Let us suppose that a country has a money supply of 100 dollars, and a pandemic hits forcing everyone to stop working for 1 month. The government then decides it needs to stimulate the economy by injecting funds into it to keep it afloat during these difficult times. The government then decides to distribute 10 dollars throughout the economy. This ten dollars will help people pay for rent, food, and other necessities. The ten dollars injected into the economy works well over the next month to help people maintain. Now, even though it worked well, the value of the currency fell by approximately 9.1 percent. Why did it decrease in value though? Well currency value is directly correlated with supply of the currency, simply stated, the more of something there is, the less that thing is valued. (there are complexities within the theories of (1) value and (2) supply and demand, but it all boils down to this basic idea/principle.)
Now that we have an extra 10 dollars in the market, the market will slowly adapt to and recognize this, and this will eventually cause the price of goods and services to increase. If an apple was 1 dollar before the new money was injected into the economy, then the apple's price after the new money is injected into the economy increases to $1.091. This goes beyond the price of an apple though, because this applies to the price of all goods, housing, services, and so forth.
So what happens if we need to quarantine for longer than a month? What if we need to quarantine for over a year?! Well this means that the government would need to inject even more money into the economy, and as you can imagine, this would cause the currency to devalue further, and the price of goods, services, housing, and so forth would increase.
But that's not the worst of it, injecting money into an economy doesn't change the fact that no one is working, and no longer producing. If too much time goes by, goods eventually become unavailable, and whatever is left of the goods is way too expensive for the common person to afford.
As you can imagine, the ripple effects of little to no production coupled with stimulus measures can have disastrous effects. The good news is governments and people seem to realize this.
WHERE WILL BUSINESS THRIVE IN THIS DEPRESSED ECONOMY
Ultimately, people have to work to survive and provide for their families, so what businesses are likely to thrive? I am sure, based on the title you can guess that our BET is on businesses in the Gig Economy. The gig economy provides for a unique situation, where people can be productive while still complying with quarantine measures. Below is a list of companies we think you should consider when it comes to work and investments.
- Uber is one of the original gig economy companies, and while people are not using Uber for transportation nearly as much during this pandemic, Uber Eats and Uber Freight are expected to see quite an increase. Food delivery services are booming, and Uber is at the center of this market. Uber also has huge upside once autonomous vehicles begin to enter the market. They are also a great long term bet as people return to normalcy.
- Similar to Uber, Lyft stands to benfit greatly during this down economy.
- Fiver is a company the connects freelance service providers from all different walks of life to communities, businesses, and individuals across the globe. The best part about this company is that most of these freelancers selling services can work from home! This company will likely see a flood of new freelancers if we are quarantined to long because people will be reaching for additional sources of revenue, and Fiverr provides a great avenue for doing this.
- Another company that operates just like Fiverr and stands to benefit during this time.
- A food deliver service that is already moving to a "no-contact" food delivery method in order to be safe during this pandemic.
These companies stand to benefit not just in the short term, but in the long term as well, we encourage you to explore these opportunities, and let us know what we have missed out on.
Be safe everyone.