How COVID-19 will Impact Internet Services and E-commerce

Professor Dan Wang discusses how COVID-19 will affect Internet services and e-commerce through the lens of Amazon. 


Dan Wang, Lambert Family Associate Professor of Social Enterprise in the Faculty of Business

March 3, 2020

There’s never been a moment in history when it’s been more clear what the strategic importance of a company like Amazon is. While the U.S. might lack the coordination capabilities of other countries, the U.S. has a concentration of industrial might and technological innovation that no other country possesses. There’s no better example of this than a company like Amazon. 

In fact, companies like Amazon, or Walmart for that matter, are already strategically important to the U.S. - they’re how most of the country gets what it needs. Walmart is the largest employer in the United States, and 90% of Americans live within 10 minutes of a Walmart. And last year in 2019, about $280 billion came to Amazon in revenue. 

One of the largest categories of revenue for Amazon is Amazon Web Services (AWS). AWS provides cloud and backend computing for some of the biggest businesses in the world. These companies all need to function at an even higher level than they did before - and Amazon is the backbone of those efforts. 

Coming out of the coronavirus crisis, I think you’ll see companies like Amazon gaining greater market power, and changing our view of what an ecommerce company should look like. If traditional retail hasn’t adapted by now, this crisis will force their hand. 


Hypersensitivity to Coronavirus News and Market Reactions

Professor Harry Mamaysky explains how hypersensitivity to constant coronavirus news drives market reactions – and vice versa. 

Harry Mamaysky, Faculty Director

April 2, 2020

My research shows that in times of volatility like the COVID-19 pandemic, financial markets can be highly influenced by anxiety reported in the media, even on days when fundamental conditions do not significantly deteriorate.

Now, we’re in the middle of what I would call a non-virtuous market cycle heighted by non-stop media reports. Sure, stock prices should naturally be lower now than they were a month ago when we knew less about the virus, but the extreme swings we’re seeing are tied to the ceaseless news stories covering the crisis, which in turn is causing hyper-reaction in the market that we would not see otherwise.  In short, market conditions are worse than they likely should be on account of the media’s justifiable concern with the virus and its resulting impacts. I say ‘justifiable’ because the media produces news its customers want to read, but the extreme market volatility seems to be a consequence of this dynamic.

Markets and media coverage can create a vicious feedback loop, that in effect feeds its own extreme volatility. News attitudes can undoubtedly have hypersensitive reactions to bad days on Wall Street, but Wall Street similarly reacts hyper-sensitively to an onslaught of negative news.


President Trump's Coronavirus Speeches Fuel Crisis of Confidence

Professor Adam Galinsky discusses why President Trump's speeches on the coronavirus have fueled more panic than calm. 

Adam Galinsky, Vice Dean for Diversity, Equity and Inclusion

March 13, 2020

We are in a COVID crisis. And with any crisis, especially one marked by uncertainty, people look to leadership for a path forward. But when leaders fail to provide that guidance, powerlessness prevails. I’ve found that in crises people fill voids of strong leadership with conspiracies and superstitions, further fueling a sense of losing control and panic.


Over the past decade, I’ve created an equation that can help anyone QORC a crisis back into its bottle: be Quick, Open, Responsible, and Committed to a path forward.


This formula can also explain why President Donald Trump’s three separate speeches in less than a week sent stocks up and down with the frequency of a steep roller coaster. From his primetime speech failing to reassure a fearful public and sending the stock market panicking to his Friday afternoon speech sending the stock market soaring to his Sunday proclamations sending the market into a downward spiral all over again — words matter. 


So, what should Trump’s speeches look like?


First, he needs to be quicker, responding with greater speed to changing circumstances. His briefings need to be daily.


He needs to openly and accurately describe the present problems and vividly describe the fears people were currently experiencing.


He needs to project responsibility. That means accepting responsibility for the past but also fully accepting responsibility going forward.


And he needs to connect that current reality to his committed path forward.


We don’t know when this crisis will end. But we do know the necessary steps and actions leaders can take to expedite its timely demise. Effectively resolving a crisis can also lead to a better world. Maybe after this crisis has receded, we can be one America again, a nation with the perfect curve.


Coronavirus Spurs Highest Jobless Claims in U.S. History

Professor Stephan Meier explains the emotional and mental cost of unemployment as coronavirus spurs mass jobless claims. 

Stephan Meier, James P. Gorman Professor of Business; Chair of Management Division

April 3, 2020

Some 10 million Americans, the highest jobless claims number recorded in U.S. history, applied for unemployment in the last two weeks. The financial consequences of unemployment are extensive for these workers and for a nation under crisis. But it’s worth pointing out that the effects of job losses are not solely monetary.

My research shows that jobs provide purpose, a feeling of competence, the sense of being useful and the connection to other people that cultivates a sense of belonging and community. Whether someone works behind a bar, as an actress or as a building maintenance person, a job gives—beyond a paycheck—mastery of a craft or skill and structure in the day. Thus, when someone loses a job, they lose much more than crucial income and benefits like health insurance. They lose a source of fulfillment, meaning that these newly unemployed workers will be suffering much worse than just financial strain.

The longer the coronavirus lockdown lasts, the higher the psychic cost will be for millions who are missing the meaning that they gain from work. But all is not lost.

The coronavirus shutdown could help workers gain a new appreciation for personal interaction in the workplace, potentially increasing productivity and fulfillment upon their return to offices. What’s more, firms are likely learning how to optimize their workflow using technology, while employees are gaining a sense of autonomy over the structure of their days, perhaps resulting in healthy new habits when they’re back in the office.

But until then, companies and employers strategizing how to preserve mission and revenue, and policymakers looking to provide critical relief to millions of newly unemployed Americans, must be mindful to incorporate compassion and acceptance as they plan for the future of their workforce.


Economic Confidence Amidst Coronavirus Pandemic

Professor Laura Veldkamp explains why it is important to maintain confidence in the economy even during a pandemic. 

Laura Veldkamp, Leon G. Cooperman Professor of Finance & Economics

March 13, 2020

There are significant costs to the coronavirus (COVID-19) outbreak. First, and foremost, is the loss of lives. But there are also two components to the economic costs that should be addressed.

One component is the direct cost: employee absences and higher health care expenditures. But so far, those direct costs have been relatively rare. The second component, fear and mitigation policies, have accounted for the bulk of the costs so far.

Shuttering schools means many parents can’t work. Closing borders means business is interrupted. But it’s the human fear of exposure to the virus that has the potential to decimate the travel and entertainment sectors.

This fear feeds on itself. If I am a provider of leisure goods and I expect that others will not buy my leisure goods, I expect to be poorer. That makes me less likely to work long hours and less likely to spend on others' goods. What we do depends on what we expect others to do.

Confidence matters.

That confidence is what we saw shattered this week when public health policy failed to contain the COVID-19 virus. Confidence is easily broken and slowly repaired. I am sure that as a country, we will pull through and Wall Street and Main Street will recover to pre-virus levels. But the fear that such an epidemic could reappear will likely exert a small downward force on prices and demand, for decades to come. 

The Costs of a Coronavirus Vaccine

Professor Frank Lichtenberg discusses the potential impact of a coronavirus vaccine on longevity and medical care. 

Frank Lichtenberg, Cain Brothers & Company Professor of Healthcare Management in the Faculty of Business

March 16, 2020

According to a recent Bloomberg article, coronavirus could cost the global economy $2.7 trillion. This suggests that a coronavirus vaccine, or an effective pharmaceutical treatment of COVID-19, could be worth many billions, and maybe even trillions, of dollars.

Biomedical and pharmaceutical innovation have had non-trivial effects on mortality/longevity, disability, and use of medical care, especially hospital care, for decades. And I imagine a coronavirus treatment would be no different.

For example, in a study I published in the peer-reviewed journal Forum for Health Economics & Policy, I estimated that, if no new drugs had been launched after 1981, total days of hospital care in 2015 would have been 163% higher than it actually was. The estimated reduction in 2015 hospital expenditure that may be attributable to post-1981 drug launches was 5.3 times as large as 2015 expenditure on those drugs.

Almost all of those drugs were for “old diseases,” not “new diseases” like COVID-19.

Although the social value of a coronavirus vaccine, or an effective pharmaceutical treatment of COVID-19, could be many billions, and maybe even trillions, of dollars, it will probably take at least a year, and probably longer, for a vaccine or drug to be developed and approved. Time will tell what the costs on healthcare and longevity will be until then.

Macy's Furloughs and the Impact of COVID-19 on Retail

Professor Mark Cohen discusses the recent Macy's furloughs and the ways in which retail has been, and will continue to be, effected by COVID-19. 

Mark Cohen, Director of Retail Studies

March 30, 2020

Companies like Macy's can hardly be expected to come out in the same condition they were in before it started. The reality is, they will be substantially weaker. If they take on more debt by tapping their credit lines they will be under considerable future stress even if that leveraged cost is diminished somehow through some form of interest reduction or forbearance.

In Macy’s case, the weak malls that hundreds of their stores reside in, now closed, may never reopen, or, if in fact they do reopen, they will be even more encumbered by vacant stores. The financial burden of remaining solvent notwithstanding, how will this crisis impact consumer behavior? This is a critical question. 

It’s highly likely that e-commerce, which is currently a lifeline for millions of consumers and which has substantially accelerated the growth of online grocery, will now grow at a faster rate.

This would help Macy’s, but, will consumers regain their appetite for apparel and accessories, particularly from a store that has struggled for years to demonstrate any meaningful form of product differentiation?

Everything is going to hinge on how long this pandemic lasts and whether the US government has the insight and skill to transcend ignorance and petty politics in providing leadership for our future.

Bob Iger's Decision to Step Down

Professor William Klepper discusses former Disney CEO Bob Iger's decision to step down two years before previously expected

William Klepper, Adjunct Professor

February 27, 2020

Bob Iger has kept his board in the loop on his decision to step down, and the ascension of his replacement, Bob Chapek, was a part of that decision. It’s clear that now Iger is hoping to energize the creative side of the business. From a governance perspective, the board needs to continue to approve the strategy for achieving the company's desired future state. Chapek must assume the implementation of that strategy in partnership with Iger and the board. Disney is in a transitional phase, which will require a congruence of the strategy, the CEO and the business system - a dynamic I discuss in The CEO'S Boss: Tough Love in the Boardroom (Columbia University Press, 2019), in what I call the “CEO Alignment Model.” 

The Rise of Bernie Sanders

Professor Shai Davidai discusses Bernie Sanders' rising popularity in terms of economic inequality, mobility, and zero-sum thinking

Shai Davidai, Assistant Professor of Business

February 28, 2020

As I see it, Bernie Sanders’ popularity is due to two major things. First, research has found that people care more about economic mobility than about economic inequality. Yet, the rise in economic inequality in the United States has not been accompanied with a similar rise in economic mobility. As a consequence, people are starting to feel the effects of reduced economic opportunities, rendering the financial obstacles they experience to economic success more salient. By talking about the rise of economic inequality, Bernie Sanders effectively leads people to focus on their lack of economic opportunity, and to view economic success as more due to luck and external forces than to the internal attributes of the rich. 


Second, as I show in my recent research on ideological zero-sum thinking, Bernie Sanders relies on zero-sum rhetoric about economic success. His talking points portray the success of well-off individuals and corporations as coming at the expense of lesser-off others. This kind of rhetoric about economic success is especially popular among liberals, which explains why liberal voters are so taken by it. However, my research shows that conservatives are averse to this kind of rhetoric, which casts doubt on Sanders' ability to successfully keep using this kind of rhetoric when courting moderate conservative voters. 

Green Investing and the Rise of Green Funds

Professor Bruce M. Usher discusses the challenges and opportunities of environmentally-conscious investing as green funds mark major trend heading into 2020. 

Bruce Usher, Co-Director of the Tamer Center for Social Enterprise; Elizabeth B. Strickler '86 and Mark T. Gallogly '86 Faculty Director; Professor of Professional Practice

January 31, 2020

The investment opportunity for green technology growth funds is both better and worse than it may appear. So-called greentech funds were very popular around 2007, but they nearly all failed because investors misunderstood the challenges specific to green technologies. To name a few sticking points, green technologies are often capital intensive and only commercially viable at scale, creating what’s known in the industry as a funding “valley of death” between early stage investors and market acceptance. Green technologies are also often physical products, which are hard to finance because they have long product development cycles and long sales cycles; they usually produce a commodity (e.g. electricity), which must compete on price, has no brand value, and often has inelastic demand; they are impacted by government policies, creating risk and uncertainty for investors; and incumbent companies (e.g. oil companies) have not traditionally acquired green technology companies, creating few exit opportunities for investors.


Having said all that, the opportunity today is much better than it was in 2007 for two reasons. One, green technologies are much more competitive today. For example, solar and wind can compete with fossil fuels without subsidies. Also, the demand for climate change solutions is much greater. While the federal government has dropped the ball on climate, state governments are passing legislation to support green technologies (e.g. NY State), and even more importantly, corporations are aggressively increasing their purchase of green technologies (e.g. entering into PPAs to source clean energy).


All in all, investing in green technologies is very challenging, but the opportunity has never been greater.


Jeff Bezos’ $10 Billion Climate Change Pledge

Professor Geoffrey M. Heal discusses Jeff Bezos’ pledge to donate $10 billion to fight climate change, and the criticism Amazon received in the wake of the news. 

Geoffrey Heal, Bernstein Faculty Leader

February 18, 2020

Amazon is typical of most on-line shopping entities. They are representative of how this sector operates, and the reason they are being singled out is that they are the biggest, and that means they have the power potentially to set standards. 


Amazon has ordered several thousand electric delivery trucks from Rivian, a start-up in which it holds a stake, and when these are in place they will clean up its local delivery operations. Both UPS and FedEX are moving to electric trucks too, and that will also contribute to cleaning up the profile of on-line shopping. The big issue then will be air transport, which is extremely hard to clean up. But remember, products always have to be shipped from maker to user, and in today's world these two can be thousands of miles apart, so a lot of long-range transport is unavoidable. This would occur even if there were no online shopping. 


Bezos's $10 billion is a huge donation, and if well-used can make a massive difference to the area. We just have to wait and see how he will manage such a vast sum. 


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