1.3 Getting Down to Business

When it became clear in 2020 that the virus was highly contagious, the lives of young people were severely disrupted. Most high schools and colleges moved from in-person to online classes. Not only did this shift in the type of classes offered threaten educational achievement, it also had a huge impact on students’ social lives, which are often connected to their schools. Without daily contact with their peers, students were separated from their friends and had little opportunity to build new friendships.

Many of the school activities young people had enjoyed in the past were taken away.  High school students could no longer participate in or watch school sporting events, and for many seniors, their senior prom, senior trip, campus visits to prospective colleges, and graduation were cancelled or were held in nontraditional forms. 

Some college students living in on-campus housing were temporarily confined to their dorms. Many college students were denied well-deserved opportunities to participate in sports. Cancelled sporting events meant students could not enjoy watching college games. Dining halls were closed and students were offered grab-and-go food instead. Fitness centers were shut down. Campus parties and other in-person gatherings were not permitted, and some colleges cancelled spring break altogether. 

With the routine business of the country sharply curtailed, many young students faced pressing adult problems ahead of schedule. As many families suffered significant losses of income due to job losses, high school and college students were unable to earn even modest sums to help their families and cover their own education costs. These economic consequences of the pandemic led to a high level of collective anxiety for young people.

Credit goes to many of the young people in our country. They made sacrifices, not for themselves but for others—older or unhealthy members of our society who were more likely to die from the virus. The role played by many of today’s young people in stopping the spread of the virus has been crucial, and their response has been unselfish. Society owes a debt to them.

To get a better picture of the impact of the coronavirus on businesses, let’s look first at its impact on large companies and particular industries, and then we’ll look at the impact it’s had on small businesses.

The need for individuals to stay at least six feet from each other while working led to the shutdown of many businesses. In some industries, particularly those engaged in manufacturing, employers had few options for keeping employees at their jobs. Many workers whose jobs could be done online were allowed to work from home. Others, such as auto workers, were laid off. As businesses closed down, the unemployment rate in the United States climbed to 14.8 percent in April 2020—the highest since the Great Depression seventy-five years earlier.

Companies in some industries lost their sources of revenue very quickly. Particularly hard hit were the travel, hospitality, and entertainment industries. Almost immediately, travel both abroad and within the United States came to a screeching halt. The airlines, which had been enjoying record profits, were suddenly left without customers. With no planeloads of customers arriving, hotels began closing their doors and car rental agencies had no renters. Cruise ships ended up looking like floating germ factories, and the cruise industry crashed (but not before many of its passengers were stuck on ships with no place to dock). Even the doors to Disney’s main theme parks were shut.

Poor decision making by corporate executives in hard-hit industries created shortages and price hikes that harmed consumers in 2021. For example, extremely high lumber prices in 2021 are a consequence of decisions made by sawmills to shut down production of lumber at the start of the pandemic. High prices for automobiles today reflect decisions made at the start of the pandemic by chip manufacturers to focus on making chips for consumer electronics instead of making chips for vehicles. Renting a car during the summer of 2021 became very expensive due to shortages of rental cars—the consequence of rental car companies selling off car inventory in 2020 and a shortage of automobiles available for rental car companies to buy (due to the previously mentioned shortage of chips for cars).

Several companies, such as Netflix, flourished during the pandemic because their products were designed to be consumed from the safety of one’s own couch. Some companies even expanded, such as the teleconferencing app Zoom and food ordering and delivery companies, such as Door Dash, GrubHub, and UberEats. And, of course, business conditions were relatively favorable for companies offering products over the internet—Amazon and eBay, for example.

Another not-so-surprising category of pandemic beneficiary includes pharmaceutical companies Pfizer, Moderna, and Johnson & Johnson, which raced to find a coronavirus vaccine. Also included among the pandemic beneficiaries are companies that focus on keeping people healthy, such as manufacturers of personal hygiene products (masks, hand sanitizers, disinfectants, etc.).

One example of a business that thrived in the wake of the pandemic is Zoom videoconferencing, which rose to prominence and reshaped the way we work, learn, and communicate in a dramatically changed world. 

When schools started to close in March of 2020, it became clear that teaching must continue, and the obvious solution for many schools was to move to online or hybrid classes. To do this, they had a choice of video conferencing software from established companies including Google, Cisco, and Adobe, but the company that took the spotlight was Zoom. Not only could Zoom help teachers meet their students online, it could also, at least partly, reduce the ever-growing social isolation felt by those stuck in their houses. A look at the company and its enthusiastic founder and CEO—Eric Yuan—helps explain why Zoom became the “go to” video conferencing site.

Eric Yuan was born in China, where he earned degrees in math, computer science, and engineering. During his first year of college, his girlfriend lived ten hours away. To see her, he had to spend ten hours each way on a train. On one of his long train rides, he thought: wouldn’t it be nice if there was an easier way to see and talk with her without sitting on a train for twenty hours? His solution: spend his time on the train ride developing software that would allow him and his girlfriend to see and hear each other in real time.

This goal, in addition to a talk by Bill Gates on the promise of the internet, inspired him to come to the United States and work in Silicon Valley. But getting a visa to come to the United States was not easy. His visa application was turned down eight times, but the ninth try worked. He and his wife (his former ten-hours-away girlfriend) moved to the United States in 1995, when he was twenty-seven. His first job was as a coder for a start-up company, WebEx. When WebEx was bought by CISCO, Yuan became its vice president of engineering. He enjoyed a high salary, but he was not happy. In typical entrepreneurial fashion, Yuan left his high-paying job and took a risk. He and forty engineers he brought with him started Zoom in 2011.

Right from the start, Zoom did well by focusing on two main goals: keeping the product simple and easy to use and making their customers happy. As the coronavirus pandemic continued to debilitate the country and the need for easy-to-use teleconferencing products “zoomed,” so did the company’s bottom line. Suddenly, Yuan found he had the right product at the right time—his net worth had grown to $16 billion. His goal of keeping Zoom easy to use created some speed bumps for the company, most famously issues with “zoom bombing.” The company got the message—its security had to be strengthened. He acted immediately and focused the entire organization on solving the security problem, and the company successfully made it through its first speed bump.

In addition to providing a means for teachers, students, and others to communicate with each other during the pandemic, Zoom has done the following to help us get through this difficult time: (1) removed the forty-minute time limit on its “free” product for K–12 teachers, and for others over the holidays; (2) offered summer programs for teachers to learn about effective online instruction; and (3) ran COVID-19 and antibody testing sites.

Prior to the coronavirus pandemic, there were more than 31 million businesses in the United States that employed five hundred or fewer people (local restaurants, convenience stores, hairdressers, etc.). Almost half of all U.S. adult workers, just under 48 percent, were either self-employed or employed by small or medium-sized businesses.

When it became clear that controlling the spread of COVID-19 meant encouraging all workers to avoid clustering in commercial settings, states began requiring “non-essential” businesses to close shop or change the way they conducted business. Based on several surveys of small businesses, the resulting disruption in revenue caused 25 to 36 percent of small businesses to close permanently. Not only did the owners of these failed businesses lose the money and effort they had invested in building their businesses and their dreams, but also their employees found themselves unemployed. Closings and operational reductions affected millions of workers.

Small businesses were particularly hard hit because they didn’t have the resources that larger companies could draw upon to weather the economic storm caused by the coronavirus. According to a study by J.P. Morgan Trust, the average small business has only enough cash on hand to survive nineteen days without income. “Imagine you run a little café,” says Brad Plothow, a vice president with the data firm Womply. “You have the overhead of rent, it’s not like an online business where you pay for a domain. You actually pay for a physical building. You have all of your utilities you have to pay, you have your employees. You have property taxes you have to pay for. It’s a lot of fixed costs.” “You're going to see businesses close every day,” predicted Plothow.

Not only were millions of jobs lost at these businesses, but the loss of those jobs also wiped out downstream jobs that depended on them. A reporter for the financial website The Street who interviewed Boston-area business owners was told about “mass layoffs among delivery drivers who no longer had routes, linen services that lost all of their clients over the course of three days, and food suppliers desperate to unload products that have begun rotting on the shelves.” Unemployed workers struggled to make ends meet.

What happens in communities when small and mid-sized businesses start laying off workers, perhaps 800 people at one employer, 450 at another, 575 at yet another? The effect is what economists call a “ripple effect.” According to Matt Murray, director of the Center for Business and Economic Research at the University of Tennessee, the loss of 1,500 jobs in a local economy will cost more than $100 million. Then, of course, there are the ripples that threaten to inundate people who are treading water on a daily basis—“stretched-thin families, shell-shocked job-seekers, stressed-out employees, lost homes, repossessed cars, canceled medical procedures and lost business accounts,” reports one journalist.

You might be asking yourself: Why did some businesses survive the pandemic while others closed their doors permanently? One factor you might consider when separating survivors from those that failed is the type of product offered or services provided. To do this, we will look at two small businesses—a restaurant and a dry cleaner.

Penne Pasta is an Italian restaurant in Lahaina, Maui. Generally, Maui is booming with tourists. But when the pandemic hit, the governor of Hawaii basically closed the island to visitors as well as prohibited inside dining. The owner of Penne Pasta, Juan Gomez, along with his sister, Martha, joined together to save their small restaurant. They refocused from the tourist trade to those living in the community, and from eat-in business to takeout orders. They both worked twelve-hour days, seven days a week—one would cook and the other would deliver food. It was a grueling schedule, but the business survived.

Penne Pasta survived because of hard work on the part of its owner. Plus, it had options—it could adjust its business model to takeout orders and delivery. But, as we see with the following discussion of companies in the dry cleaning industry, not all business owners had viable options.

It was not so easy for owners of dry cleaners to survive the pandemic. Their revenue plummeted by about 90 percent as former customers started working from home in casual, washable clothing. The cash brought in from the few clothes that came into their businesses did not cover the cost of running their machines. Unlike restaurant owners who could pivot to takeout business, or small retail establishments that could build an online presence, owners of dry cleaning establishments had few, if any, options to survive the pandemic. And they feared that the trend toward working at home would continue even after the pandemic ended. The only option for many owners of dry cleaning businesses was to cut their losses and go out of business. Many took this option—during the first year of the pandemic, one out of six dry cleaners went out of business or filed for bankruptcy. Unfortunately, more dry cleaners closed in the years that followed.

The coronavirus pandemic created both a severe public health crisis and an economic crisis. To help ease the burden faced by individuals and companies in this unprecedented emergency, the federal government passed six major bills totaling about $5 trillion. The whole package, however, does come with something to worry about: where is the money coming from? To pay for the six stimulus bills, if federal revenues do not increase, the U.S. government will have to borrow $5 trillion, pumping up the national debt to about $33 trillion. (A trillion being a million millions, a stack of $100 bills worth $5 trillion would be about 340,000 miles high—more than the distance to the moon.)

As terrible as going through the pandemic has been for all Americans, there is a light at the end of the tunnel. Thanks to Project Warp Speed that provided federal funds to multiple COVID-19 vaccine candidates to speed up the development of vaccines, vaccines to help protect against the virus became available in record time. As of October 6, 2022, 613 million doses of the vaccine have been administered in the United States by the three main providers (Pfizer, Moderna, and Johnson & Johnson). Once a high percentage of people in the United States became vaccinated, or had been infected, our country could return to normal. What “normal” means, though, is still to be determined. We know one thing for sure—life for most of us and for business owners will be better than it has been since COVID-19 first arrived in the United States in January 2020.