WFH proves that keeping track of trends is tricky

OLD NORMAL


WFH proves that keeping track of trends is tricky when the dynamics are always shifting


OLD NORMAL

Surprise, surprise, Google is calling employees back to the office from 1 September, meaning no more working from home, and they must live within commuting distance of the office. How things have changed.

A year ago we were euphoric about the idea of working from home (WFH), delighting in our new-found productivity and revelling in our reduced commuting time. Even the longer hours, endless virtual meetings, and blurred lines between work and personal life didn’t dim our enthusiasm, and the WFH concept seemed entrenched. Articles declared how COVID-19 had accelerated the trend by 15 years; how property funds with high exposure to office buildings suffered from redemptions; while at the same time the shares of firms enabling remote working skyrocketed.

This was a sea-shift. Twitter’s Jack Dorsey made headlines last May when he said that ‘Twitter employees can now work from home forever’.

Apparently it takes people about 60 days on average to form a habit; so given the duration of the lockdowns, we’ve had ample time to adapt. However, as the vaccine roll-out gathers global momentum and lockdowns ease, I wonder whether the trend is as entrenched as we think.
Amazon said in a recent letter to staff that it plans to return to ‘an office-centric culture as our baseline’ … because it ‘enables us to invent, collaborate and learn together most effectively’. And Microsoft sees ‘working from home part of the time (less than 50%) as standard for most roles’ in the future. This from the world’s tech giants that were supposedly driving the WFH revolution?

A year down the line, we have been able to assess remote working more objectively, and while there are clear benefits, there are also down sides. For complex discussions or collaborative projects nothing beats a physical meeting just to thrash out solutions or ideas. Shoot-from-the-hip chats at the coffee machine cannot be replicated over Zoom.

And as much as we all try to love digital team-building, the truth is it is just awkward. This may be why the CEO of Goldman Sachs, David Solomon, rejected the idea that his employees would still be working from home after the pandemic. ‘It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible.’

Take that, lovers of streaming services…

The reality likely lies somewhere in between – companies are not completely giving up their office space, but rigid attitudes to ‘office hours’ have perhaps shifted as managers learn to trust that employees working away from the office are actually working. While these trends are interesting because they affect how we work, understanding which business moves will last and which are temporary is vital in investment decision-making. And it is important to recog-nise which trend a share price reflects – is it perhaps only temporary?

It is in these mis-pricings – where the market is pricing a stock for a certain situation to continue into perpetuity, but where things may turn out differently – that investors can find both opportunities and threats: for example, an investor who buys into a building-supply firm simply because people have redirected spend toward their homes. While data from McKinsey suggests that the ‘home-nesting’ trend is likely to remain elevated, it is unlikely to sustain long into the future as spending in, for instance, travel and dining out returns to ‘normal’.

While investors fear investing in airlines right now, can you conceive of a world without air travel ever? People will rediscover their wanderlust when funds (and vaccines) allow, and the leisure-travel industry will slowly but surely revive. But what about business travel? It was previously unimaginable, but large deals have been struck in the depths of the crisis via Zoom or Teams calls. It wasn’t easy maybe, but when there is no other choice people adapt.

So how then should investors be analysing these shifting dynamics? One way could be to group companies into ‘buckets’: those that have benefited long term from the pandemic; those with just a short-term benefit; those with temporary setbacks that will readjust; and then those already facing structural changes in their industries that have been accelerated by COVID and will need fresh business models. 
This makes picking next year’s winners as clear as mud, but at least we can’t complain that the investment world is predictable.


By Sasha Planting