in a previous era, there was political speech about a campaign of “Shock and Awe.” The idea, in those times, was to use military strength and western idealism to win “hearts and minds” of innocent citizens in the Middle East to see the valor in America’s occupation. This blog isn’t about debating whether that strategy worked or not, but certainly one can conclude for themselves.

Fast-forward to 2020, and we are all living in another moment of “Shock and Awe,” but in a very different context. The “shock” here today is largely, in my opinion, focused on the searing effect the current public health crisis will have on aggregate demand — especially consumer demand. And the “awe” is related to the unprecedented scale and scope of how wide this will be.

For anyone following the news, it’s obvious to imagine what will happen to the economy — consumers will lose income, they’ll be forced to limit their outdoor/outside activities, small and medium businesses will see a huge drop in activity, and so forth. Consider a company like Lyft being valued by public markets at around $5B this week, and they have $2B in cash on their books. Consumer demand is going to run so dry, it could literally topple a company which was otherwise on decent footing with room to grow.

The shock to consumer and business demand will also create derivative shockwaves. It’s like when you throw a big rock into a still lake — after the splash, you see the ripple effect of the concentric circles forming and, if you sit around to watch, those circles get huge. It starts with someone getting fired. Then their company fears missing payroll. Then they cut vendors. The liquidity of money moving around and multiplying as dollars are passed around stops. Perhaps nothing embodies this more than the fact that Las Vegas’ casino strip is shut down indefinitely. The federal response to date has been to use monetary policy to pump paper back into the company at large, but there are going to be millions of people who won’t make rent, may not be able to put food on the table, and may quickly face undignified choices unless they’re given direct relief by federal and state governments.

I’m writing this post because I’ve read a bunch of commentary from smart people who suggest that this could be a. “2-3 quarter thing” and things will snap back into place. I am not so sure. There is no trusted, central authority that will make consumers (and individuals in general) feel comfortable that “hey, it’s ok to take the train to the ballgame, to stand inline for a hot dog, and sit around 60,000 other fans for an afternoon.” When will that level of pubic trust ever come back? This situation has forced all of us, overnight, to adapt and change behaviors of things we’ve been accustomed to our entire lives.

The switch has been so drastic and so quick and done in a period of rampant mis- and disinformation that I am not confident it will all snap back to normalcy. Instead, I see a future now where much of the American economy (especially on the services side) is re-ordered in a brutal ways. The identity tied up in starting, owning and building a small business that surprisingly has to lay off staff, turn into a cloud kitchen, and then try to restart again will crush some folks’ spirits. Households with kids who have to keep them home and work at the same time will be skeptical of their own spending habits. If and when we get back to some level of normalcy, my strong belief is that the deep-rooted behavioral responses we are having today won’t go away — rather, the wound will cut deep, so deep it will alter consumer spending.

I can’t sit here and prove it will happen. I could grab a few articles and a paste a few fancy graphs here, but that doesn’t mean anything. I wanted to write this to share my intuition about this and share the warning for business leaders, households, parents, kids in college, and so forth. Aggregate demand will eventually come back, I’m sure, but the road to get there will take time, and the behaviors around spending will be drastically different. I sincerely hope I look back at this post years from now and declare “Wow, was I wrong!” but I believe it’s more likely this is the beginning of a new consumer paradigm we will all have to adjust to.