New Year, New Idea: Post pandemic lessons from those who were first to suffer, first to recover

There’s a booming market in assessing the state of post-Covid recovery. The Pret Index, for instance, measures our appetite for grab-and-go food against a January 2020 baseline. Tellingly, suburbs are back to their pre-pandemic peak whereas airports are still a quarter off - an indicator that’s further supported by TSA checkpoint numbers. 

My rule for understanding how we bounce back is more intuitive and draws upon the work of Nobel laureate Ronald Coase: Observe businesses that were ‘first to suffer, first to recover’ and tease out their economics. Three seemingly unrelated businesses offer transferable lessons: aviation, live concerts and fashion.

The common thread is their end product which is in each case scarce, excludable and, most importantly, perishable. It's this perishability point that matters most; it cancels out complacency. Stockpiling, what seems like a standard response to the pandemic, wasn’t an easy option for flights, festivals and fashion.

These three industries teach us about what I call ‘Tarzan Economics’; letting go off the old vine of doing business and reaching out for the new. And by being the ‘first to suffer, first to recover’, we can also learn about how the light at the end of their respective tunnels can result in an outcome that’s better than what went before.

Our first lesson is from airlines. Large sunk costs meant they couldn’t just park all their planes (as you would your car), due to the hefty time, labour and money involved in getting them back into operation. The innovative low-cost carrier JetBlue conducted its own clever cost-benefit analysis, opting to pivot and repurpose some planes by donating free flights to help essential health care workers travel across the country to fight the pandemic - avoiding the costs of parking and banking the benefits of goodwill.

But aviation is now dealing with a deeper problem: the ‘long tail’ of seat pricing. For incumbent carriers, business class typically accounts for 20% of volume and 75% of profits, but that’s been upended by remote working and virtual conferencing. Low-cost carriers are rebounding faster because they’re not dependent on the front of the cabin to make money. British Airways, now the world’s nineteenth favourite airline, needs to buckle up as JetBlue’s pivotal strategy allowed it to pounce on new opportunities (whilst others were caught napping) and enter the battle for transatlantic routes.

The next industry we can learn from was back to its busiest in August: outdoor music festivals. Both Reading and Leeds festivals sold out in record time this year, as customers replenished their lack of summer festivals music during lockdown. Yet, by contrast, demand for indoor arenas has been soft - forcing artists like Dua Lipa to delay performances. Music fans want to be outdoors, it seems, but they’re still not yet ready to go back indoors.

This boom in festivals is part of a decade-long trend: back in 2012 UK gig-goers spent £1.2bn on concert tickets; By 2019, the year before live music was all but silenced, that increased to £1.7bn. What's striking from the chart below is that all of that growth happened at stadiums, festivals and arenas, with theatres being squeezed. Festivals have been surfing a decade-long demand curve, supplying more events yet still selling out at even higher prices (remarkably two days at Reading will cost you the same as two years of Spotify, or four if you're a student).

The past suffering of silenced music is fading faster thanks to a quirky fiscally-stimulated recovery: a special VAT rate of 5% on concert tickets that kicks in at the point of sale, not the point of event. The upshot being that every promoter in the country is currently front-loading next year's festivals ticket sales before this tax sweetener is tapered off. Time is fast running out, as Kevin Brennan MP recently established it gets ‘whacked up to 20% on 31 March’.

From festivals to fashion. For an industry that rarely looks backwards, fashion used its mirrors for serious self-reflection as it returned en masse from its ill-fated exodus to Milan in March 2020 (when the virus first swept through Italy). Moreover, fashion faced the challenge of Covid just as several other long-term issues began to surface: sustainability, workers’ rights and waste.  But it's from fashion's ‘cycles’ that we can learn more about our recovery.

Imagine if you were a designer showcasing your latest ideas in Milan prior to the pandemic, set to surface in Winter 2020. Lockdown meant many (if not all) of those ideas were simply ‘lost in the ether’, never to see the light of day. In response, a group of industry leaders assembled under the hashtag #rewiringfashion now want to reinvent the fashion cycle by ditching the entire ‘six months prior to collections’ windowing strategy and instead allow designers to go straight from the show into stores’ windows and onto websites for immediate purchase. 

Three lessons in Tarzan Economics from those who were first to suffer, first to recover, all resulting in something better than before. In travel, customer standards have been permanently reset: self-service, digital identities and hygiene expectations have all been raised to new levels and surely will never turn back.

Live music is getting rid of cumbersome and costly paper tickets, with app-based start-ups like DICE pioneering mobile, tout-free tickets. What’s more, live promoters are getting more inclusive, evidenced by engaging with the inspirational campaign “Attitude is Everything,” which champions deaf and disabled people's access to live music.

Finally, fashion is letting go of the antiquated ‘windowing cycle.’ To some extent, instant gratification is part of a wider logistics trend: Movies are circumventing cinemas and even Estée Lauder is now partnered with Uber on Next-Hour Delivery.

Covid accelerates the way we all have to traverse the jungle: it's as if we've gone from just in time to just in real time. Tarzan Economics is key, letting go of our fear of change and having the confidence to reach out to the new - so on that note let me wish you all not just a happy new year but the best of luck swinging into twenty twenty two.

Will Page is the author of ‘Tarzan Economics: Eight Principles in Pivoting through Disruption’, published by Simon & Schuster in the UK and Little Brown in the US. He was formerly Chief Economist of Spotify and PRS for Music, where he pioneered Rockonomics. Will’s work is regularly featured in Billboard, The Economist and the Financial Times. He is a visiting fellow at the London School of Economics and a fellow at the Royal Society of the Arts.

Acknowledgements: Dmitry Kopylov; Marion Dupont-Nougein; John Mottram. Hat Tips to the wordsmith Sam Blake and designer Alice Clarke