There are several elements of capitalism that haven’t changed since Adam Smith pioneered the concepts of efficiency and division of labor in a capitalist context, but there are possibly even more elements that have. The past year has been an exciting one for scholars of economics as it looks like the very fabric of capitalism could be changing as companies and thinkers have had an entirely new world of limitations that they have had to work through.
Remote Work
Remote work has had a major effect on the nature of business over the past year. For example, it changes one of the core assumptions of capitalism – that you must invest in some significant overheads to facilitate the creation of more wealth. As remote work startups have found over the past year, remote work requires very few overhead costs. Instead of paying for an office, electricity, water and everything associated with that, you can instead just pay for work from home tools like modern intranet. This makes businesses far more scalable than they traditionally were. Without the constraints of rent contracts and other overheads, a company is able to grow or shrink in size far more easily, making it a leaner and more efficient organization.
Longer Term Planning
Since the 1980’s there has been a marked change in the philosophy behind capitalism. Capitalism has always been about enhancing profits as much as possible, but with the support of Reaganite policies like stock-buybacks, this philosophy started to move towards short-term profits instead of long term.
The hyper-growth associated with that short-termism has led to a lot of profit for companies across the world, but in the face of economic hits like in 2008 and during this year, companies that prioritize short-term profits have found themselves stuck. Small businesses have struggled the most, as big businesses are far more likely to be on the receiving end of government bailouts. Many businesses have had to fire employees and shut down areas of operation just to survive, while many others have declared bankruptcy.
Add in the Growing Awareness of Climate Chang
Compounding this issue is the significance of the oil industry taking such a hit this year as climate change activism has reached an all-time high. The challenges and problems faced by industries and businesses this year is likely to cause some companies to think more about long-term growth than short-term profits, something that will be supported by companies like Amazon’s dominance (Amazon attributes much of its success to its prioritization of long term over short term).
A Tech-Focused Solution
This paradigm shift in business – towards reducing overheads while concentrating more on long-term profitability – is likely to be more successful now than ever due to the power of tech. Besides the remote work tech mentioned earlier, big data will allow people to look to longer term profit.
The power of AI and machine learning comes from the ability of technology to generate insights. With AI, a company will not just need to look towards short-term profit to see if it’s going in the right direction. Many other metrics will be able to be analzyed by AI, giving business leaders confidence to focus on long-term health and growth and combat short-termism.