Bruce Mehlman July 14, 2020 bruce@mc-dc.com follow @bpmehlman Q3 2020 THE GREAT ACCELERATION How 2020 Is Bringing the Future Faster CONTENTS THE GREAT ACCELERATION How 2020 Is Bringing the Future Faster I. SUMMARY……………………………………………………………………..… 3-4 II. YESTERDAY………………….………………………………………………...… 5-8   Key Trends in Technology, Globalization, Culture & Politics Sowing the Seeds of 2020’s Crises: Foreseeable Failures III. TODAY……………………………………………………………..…………….. 9-14   Key Trends in Technology, Globalization, Culture & Politics The Crises of 2020: It’s the Pandemic, Stupid IV. TOMORROW..…………………………………………….………………… 15-23  Key Trends in Technology, Geopolitical, Cultural & Political V. THE 2020 ELECTIONS………....……..…………………………………. 24-30 VI. RECOMMENDATIONS……………..……………..…………………….. 31-34 2 SUMMARY The Great Acceleration TECHNOLOGY • • • 4TH Industrial Revolution Speeds Up Digital Disintermediation Expedited New Tech Regulation (aka “Techlash”)) GLOBALIZATION • • • New World Disorder Demographics Will Drive Declines Nationalism > Globalism CULTURE • • • New Psychology & Priorities Post-COVID Leadership Leaving Washington More Diversity & Inclusive America POLITICS • • • Bigger Government Party Civil Wars & Realignment New Reform Era 3 2020: A YEAR UNLIKE ANY OTHER Four Concurrent “Super-Disruptors” (Since 1900 only 3 other years had 3) 2020 1968 1957 1919 Recession Pandemic Mass Protests Intense Election YES NO YES YES YES YES YES YES YES YES YES YES YES YES NO NO 4 YESTERDAY The Age of Disruption Backlash YESTERDAY’S KEY TRENDS: A WORLD REMADE TREND OPPORTUNITY CHALLENGE BACKLASH TECHNOLOGY Digital Age Dawns Innovation Booms Inequality Grows GLOBALIZATION Regulators Rise GLOBALIZATION Cold War Ends Hyper-Globalization Arbitrage & Authoritarianism INFORMS Nationalists Rise AFFIRMS CULTURE Comfortable Conformity New Voices Heard Old Gatekeepers Gone Hyper-Activism 6 POLITICS YESTERDAY: LOST CONFIDENCE IN LEADERS Loss of Trust (% Great Deal / Fair Amount of Trust) 1979 Institution 2019 54 The Military 73 72 Mass Media 41 45 Supreme Court 38 52 The Presidency 38 65 The Church 36 N/A The Medical System 36 60 Banks 30 36 Public Schools 29 N/A Organized Labor 29 32 Criminal Justice System 24 34 Big Business 23 34 Congress 11 Source: Gallup 1979 & 2019; Mass Media 2019 Voting for Change House, Senate or WH Changed Parties 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 7 SOWING THE SEEDS OF 2020’S CRISES: FORSEEABLE FAILURES PANDEMIC: UNPREPARED 2015 2009 2017 ECONOMY: UNPROTECTED 53% lacked emergency savings 27.9M lacked health insurance 21.3M lacked adequate broadband 33.6M lacked paid sick leave Sources: Savings; Leave; Insurance; Broadband SOCIAL JUSTICE: GLARING GAPS INCOME WEALTH $171 k $82 k KILLED BY POLICE (Unarmed, per 1M) 4.9 White Black $53 k $17 k IN JAIL (per 100k males 16+) 1.1 2,272 392 8 TODAY Divided We Fall TECH: THE DIGITIZED ARE THRIVING YTD Stock Performance (thru 7/12) S&P (ex-IT) Google Facebook Apple Microsoft Netflix Amazon Tesla Zoom (ex-IT) 305.5% 270.0% 69.6% 15.3% 19.4% 30.6% 73.3% 35.5% -7.3% Sources: S&P; Others 10 GLOBALIZATION: A SOFT POWER VACUUM Managing Global Challenges Without Trusted Global Leaders RUTHLESS BULLY UNTRUSTWORTHY UNFREE RECKLESS BULLY UNRELIABLE UNEQUAL 11 CULTURE WARS HAVE BECOME BUSINESS BATTLES WHY ENGAGE? STAKEHOLDERS DEMANDING HOW TO ENGAGE? ACTIONS > WORDS “Wokeforce” Consumers Ad Spending Advocacy Investors Activists Partnership Operations 12 POLITICS: THE CENTER IS UP FOR GRABS Who Will Occupy the Center? Both Parties Have Been Moving Away LEFT LOSING (Too Politically-Correct) ISSUE (Politically Exhausted) RIGHT LOSING (Too Politically-Incorrect) IMMIGRATION ENERGY & ENVIRONMENT RACIAL JUSTICE HEALTH CARE TAXES & SPENDING 13 2020 CRISES: IT’S THE PANDEMIC, STUPID PANDEMIC: DEATH BY POLITICS Official Death #: % Believe Overcounted % Comfortable Eating in 65 Restaurant Masks: % Always 63 50 29 28 5 Sources: Gallup (Apr); Pew (June) GOP DEM GOP GOP DEM DEM ECONOMY: INABILITY TO CONTROL SPREAD PREVENTS RECOVERY No Child Care? No Masks? No State Govt Help? -10% GDP -$1T GDP -5.3M Jobs (Goldman Sachs) (U. Chicago) (EPI) SOCIAL JUSTICE: FIGHTING OVER STATUES WHILE… UNEMPLOYMENT RATE COVID-19 CASES 15.4 62 (June 2020 %) 10.1 White NO REMOTE INSTRUCTION (% K-12 students) (per 10,000 people) 14.5 73 23 Black Latino White 40 30 10 Black Latino White Black Latino 14 TOMORROW The Great Acceleration TECH: DIGITAL DISINTERMEDIATION EXPEDITED Internet Cutting Out More Middlemen EDUCATION • Hybrid online-offline degrees, more access • Lower cost, higher enrollment, fewer schools • Employers are becoming the new schools HEALTH CARE • More telemedicine, greater access • A.I. transforms diagnostics & discovery • Real-time revolution: wearables + tracker apps + cloud • • PHYSICAL BUSINESS MODELS “Retail-pocalypse”  “Office-pocalypse” • Cash & credit cards  ePayments Travel & Broadcast  Zoom & Streaming • GOVERNMENT More virtual hearings & voting • A.I. Oversight (fraud, waste, abuse) • Smarter policing & national security 16 TECH: NEW TECHNOLOGY REGULATION Government is Coming In progress Very Likely Possible Unlikely N/A U.S. STATES Antitrust / Competition Privacy Enforcement Platform Liability / Content Ctrls New Digital Taxation Emerging Tech Regulations (A.I., Facial Recog., Blockchain) Encryption Access Export / Import Controls Anti-Gig Work Rules Supply Chain Security 17 GLOBALIZATION: NEW WORLD DISORDER Post-Deglobalization Paradigms Great Power Rivalry Returns FRENEMIES  ENEMIES Multilateralism Remade NEW MISSIONS, MANDATES, MODELS Competing Alliances Competing Technology Market Access as a Weapon Growing Military Frictions Cross-Border Flows Slow REDUCED RATE OF GROWTH IN: DATA GOODS PEOPLE CAPITAL KNOWLEDGE Trade Economics Disrupted TECHNOLOGY: Automation, 3D printing reduce the need NATIONALISM: Industrial policies changing the math 18 GLOBALIZATION: DEMOGRAPHICS WILL DRIVE DECLINES % Change in Working Age Population, Past & Future 3 Decades U.S. China Japan Germany India UK France Italy Brazil Canada 100 82.5 80 65.1 60 40 29.4 30.8 30 21.1 20 13.8 10.1 3.5 7.8 7.4 0 -1 -2.3 -20 -18.5 -13.9 -25.6 -40 Source: UN World Population Prospects 2017 -16.3 1990-2020 2020-2050 -5.3 -2.7 -22.5 19 CULTURE: NEW PSYCHOLOGY, NEW PRIORITIES BEFORE COVID AFTER COVID EFFICIENCY RESILIENCE G: Fund Stockpiles & Excess Capacity B: Supply Chain Optionality, Process Redesign I: Car > Metro; Suburb > City; Prepper-Nation INTERDEPENDENCE G: Industrial Base, Migration Limits B: Less Global, More Vertical Integration I: Home Cooking, Working, Schooling; DIY SELF-SUFFICIENCY LEVERAGE / RISK MARGIN / SAFETY ABUNDANCE AUSTERITY G: More Regulation, Bigger Safety Nets B: New Liability Risks, Safety Procedures; More Liquidity I: Rent > Own; Big Employer > Startup G: Government B: Business I: Individuals G: Incur Less Debt, Find More Revenue B: Deeper Reserves, Fewer Dividends/Buybacks I: Save More, Spend Less, Borrow Less 20 Great Depression WWI & Spanish Flu 10,000 Annual Federal Spending (M) 15,000 10,000 5,000 8,000 6,000 4,000 2,000 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1922192319241925192619271928192919301931193219331934193519361937193819391940 9/11 2,700,000 2,200,000 1,700,000 1,200,000 Global Financial Crisis Annual Federal Spending (M) Annual Federal Spending (M) Annual Federal Spending (M) POLITICS: CRISES GROW GOVERNMENT 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 3,800,000 3,300,000 2,800,000 2,300,000 1,800,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 21 POLITICS: THE PARTIES ARE REALIGNING GENDER GAP EDUCATION GAP 60 Women: Congressional Control Preference 56 56 Voters With College Degrees: Party ID 55 51 50 50 51 47 45 41 37 40 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2019 35 GEOGRAPHY GAP 80% Dem share of vote in counties with Whole Foods 70% 60% 50% 25 32 41 44 2010 2012 39 40 35 2014 2016 2018 34 2019 RACE GAP 48 54 40% 20 30% 20% Dem share of vote in counties with Cracker Barrels 1992 1996 2000 2004 2008 2012 2016 22 THE 2020 ELECTIONS Pandemic Politics ELECTION 2020 ?l CORE ELECTION DYNAMICS PANDEMIC ECONOMY TOLERABILITY Looks Like: “Wartime President” The Re-Opener-in-Chief Too Old, Too PC, Too Washington? Feels Like: We’re Losing the War Lockdown Joe Too Divisive, Dangerous & Corrupt? Better for the Economy Dislike both candidates: --------- 200,000+ by November Net Trump Approval (Handling Pandemic): -17 (Trump vs Biden): Trump +6 Sources: Pandemic (RCP, 7/13); Economy (CNBC, 6/19-22); Dislike (2016 Exits; Monmouth 7/20) Trump +17 2020: Biden +34 2016: 24 BATTLE OF THE BRANDS BIDEN’s BRAND RISKS TRUMP’s BRAND RISKS 1. Uncle Joe  Grampa Joe 1. Disruptor-in-Chief (seen as too old) (seen as unstable in a time of crisis) 2. Regular Joe  Radical Joe 2. Divider-in-Chief (seen as too PC for moderates) (seen inflaming divisions, race-baiting) 3. Obama Era Joe  Clinton Era Joe 3. The Pandemic President (seen as too moderate for liberals) (seen as failing to manage COVID) 4. Patriotic Joe  Partisan Joe 4. Lock Her Up  Throw Him Out (seen as rooting against recovery) (unable to shift focus off himself onto Biden) 5. No Show for Joe 5. The Vision Thing (Fear of Disease + Lack of Enthusiasm + Voting Restrictions depress turnout) (seen as lacking a plan for the future) 25 TURNOUT & TRUST People Are Very Eager to Vote in 2020 Both Sides See Turnout Opportunities & Risks Eligible Citizens Who Didn’t Vote in 2016 2018 Highest U.S. Midterm Voter Turnout Since 1914 2019 Highest “Extremely Enthusiastic” to Vote Ever Recorded (CNN) Sources: CNN (2019); Dave Wasserman,(2016); NYT (uncomfortable); Gallup (honesty) 2016 White MI College No College White 1,564k 412k NonWhite 643k MN 786k 211k 259k NH 220k 69k 25k PA 2,290k 603k 695k WI 819k 161k 306k AZ 684k 228k 904k FL 2,565k 719k 2,565k GA 1,172k 327k 1,303k NC 1,105k 321k 834k TX 2,665k 813k 4,274k People Are Very Afraid of COVID, Fraud & Voter Suppression 25% would be uncomfortable voting in person right now (40%D, 6% R) 59% of Americans are not confident in the honesty of U.S. elections 26 LESS DIFFERENCE MORE HOW ELECTIONS MIGHT IMPACT POLICY ISSUE BIDEN ADMINISTRATION TRUMP ADMINISTRATION Immigration More; give health care; DACA Less; no gov’t benefits Climate / Energy Regulate & enforce; Paris Accord Deregulate Gun Control Gun safety laws & enforcement No new laws Labor PRO Act + $15/hr Deregulate; Fewer NLRB rules Policing Reform Black Lives Matter; Have Feds lead Blue Lives Matter; Let States lead Health Care ACA+ public option; Lower age for Medicare; Lower Rx costs Kill ACA but says he’ll cover preexisting conditions; Lower Rx cost Tax Repeal Trump cuts for wealthy, corps Maintain / more cuts Finance Homeowner protection; undo regulatory rollback; enforcement Relax Dodd-Frank Foreign Policy Lead multilateral groups End old multilateralism Trade Cut “Fair” deals, TPP; re-shore U.S. supply chains; fewer tariffs Cut “America First” deals; reshore U.S. supply chains Deficits +$8.6T from ‘09-‘16 +$8.3T from ‘17-‘20 China Confront with allies Confront Infrastructure $$$$$ + green incentives $$$$$ Antitrust/Big Tech Restrain “Big Tech” (Antitrust, §230) Restrain “Big Tech” (Antitrust, §230) 27 GOP SENATE AT RISK IN 2020… IF BIDEN RUNS THE TABLE Incumbent Senators Win… 97% 70% …of races when the Presidential candidate of their party wins their state …of races when the Presidential candidate of their party loses their state 37/53 126/130 Closest 2020 Senate Races by How State Is Leaning in the Presidential Race (per Cook Report) Likely+ Dem ME (Collins) Lean Dem CO (Gardner) MI (Peters) Sources: Winning %’s (UVA Center for Politics); *State leanings (Cook Report July 2020) Toss Ups Lean GOP AZ (McSally) GA (Open) GA (Loeffler) NC (Tillis) IA (Ernst) Likely+ GOP AL (Jones) MT (Daines) 28 GOP SENATE 2022… IF TRUMP RE-ELECTED, HUGE RISKS GOP Could Be Defending 8 of 10 Closest Trump 2016 States WA MT VT ND MN OR ID NH SD WI WY NV AZ PA IA UT CO IL KS OK NM TX HI OH IN MO WV KY VA NC TN AR SC MS AK NY MI NE CA ME AL GA LA FL 6th Year Itch? 1986 Reagan lost Senate 2006 Bush lost Senate 2014 Obama lost Senate Source: 2022 Map from National Journal 29 CONGRESS: DON’T WRITE-OFF 2020 Significant Legislative Tasks Remain MUST DO / VERY LIKELY IN 2020 MAY DO IN 2020 / LIKELY BY 2021* COVID Recovery Package #5 $1T+ Infrastructure Overhaul FY 2021 Spending Bills/CR Policing Reform by ‘21 new civil rights agenda (jobs, health, housing, education) IN: liability limits, $$$ for families, states+ health system TBD: UI levels, election help, OSHA, airlines, broadband (or shutdown 9/30) FY21 Nat’l Defense Authorization Act Expiring Authorizations: • • • • • • FISA (expired 3/15) Surface Transportation (expires 9/30) National Flood Insurance (9/30) TANF & CCES programs (11/30) Water Resources Development Act Medicare, Medicaid, Community Health Ctrs & Other Public Health (11/30) Tech: Limiting CDA §230; Promoting U.S. semiconductor manufacturing; Supporting 5G broadband deployment; Cyber Solarium recommendations HC: Drug Pricing; Surprise Billing; Telehealth expansion; Moving Rx/PPE supply chains to U.S.; Health disparities/social determinants Fin: Anti-Money Laundering bill Trade: Carrots/sticks to re-shore supply chains Sanctions (China, Russia, Venezuela) Post-COVID safety net fixes Great American Outdoors Act Oversight of Recovery Spending Oversight of Recovery Spending * If Biden wins WH, new agenda & new team = more issues (LWCF permanent reauthorization) 30 RECOMMENDATIONS ?Those Who Fail to Learn from MORE CRISES ARE LIKELY We Have Been Warned… Will We Be Prepared? Second Pandemic Wave • • 8 of last 8 major pandemics had 2nd waves including Spanish Flu Coinciding with seasonal influenza could overwhelm public health in the Fall disrupting economy, elections, education Disrupted & Disputed Elections • • • Long lines, closed polling locations, fearful voters Winner may be unknown for week(s) High chance close results are disputed  largest protests in U.S. history Cyber “Pearl Harbor” • • Cyber crime costs the world $6T per year, is occurring with greater frequency with growing hacking by nations Critical U.S. infrastructure remains vulnerable Catastrophic Infrastructure Failure • • Michigan suffered collapsed dam in 2019 & lead in groundwater in 2014-2016 Trillions are needed to promote safety Climate Cataclysm • Extreme weather events have occurred with increasing frequency, driven by changing climate 32 CRISES CATALYZE REFORMS High school movement GILDED AGE GREAT DEPRESSION MERS OUTBREAK (S. KOREA, 2015) Fast, early, widespread testing Universal mask wearing Health care system prepared for surges Compliance with quarantines 33 HOW LEADERS CAN PREPARE FOR COMING CRISES 1.TRUST: the Most Important Brand Attribute This Decade  You will be judged on what you do to help in 2020… Expect aggressive government oversight, heightened media scrutiny & increasing activist engagement. 2.TECHNOLOGY: Disruptive Innovation Will Accelerate  Leverage new opportunities to become more competitive… Build a smarter, more resilient business. 3. GEOPOLITICS: Plan for Ongoing Deglobalization  Diversify supply chain optionality and engage local governments… but also lead by example in supporting multilateral institutions aimed at shared challenges. 4. CULTURE: Traditional Washington Gatekeepers Are Losing Power  Expand stakeholder outreach, doing more than just writing checks… who will partner on your priorities later because you supported theirs now? 5. POLITICS: Reforms Are Necessary & Inexorable  Engage in the messy process of political & policy reforms… populism will continue rising at home & abroad until more people feel “dealt-in”. 34 To be added to future slide distribution: bruce@mc-dc.com http://www.mehlmancastagnetti.com/ is one of the nation’s most innovative government relations firms, offering strategic solutions to companies, trade associations, non-profits, and entrepreneurs that help them succeed in Washington. RECENT MCR&T ANALYSES: Q2 ’20: After COVID: https://bit.ly/After-COVID-Mehlman2020 Q1 ‘20: Hunting Black Swans: http://bit.ly/HuntingBlackSwans2020 Q4 ‘19: Deglobal: http://bit.ly/Deglobal-Mehlman2019 Q3 ‘19: Wokepocalypse: http://bit.ly/Wokepocalypse2020 Q2 ‘19: The Roaring 2020s: http://bit.ly/Roaring2020s Q1 ’19: Permissionless: http://bit.ly/Permissonless Q2 ‘18: Empowered America: http://bit.ly/EmpoweredAmerica Q4 ‘17: Navigating the New Gilded Age: http://bit.ly/Mehlman_NewGildedAge