Major economic crises, like hurricanes, always get named: the Great Depression, the Dot-Com Bust, the Great Recession. The crisis and recovery we are living through might just become known as the Great Reboot.

The headline numbers of 26 million unemployed in the U.S. alone and the warnings of a global recession suggest the economic shocks will be widespread. Yet, the top line figures hide the true variation: The crisis will affect different industries, in different ways, at different times. The reboot will happen in three waves. Let's look at them, and what they will mean for your business.

In economic terms, you could describe the Great Reboot relatively simply. The pandemic has made the costs of moving people and goods in the analog world skyrocket, both explicitly (money) and implicitly (higher risks and more regulation).

When the cost of an input rises, there are generally two main economic consequences. First, the demand for substitutes for that input also rises. If you cannot afford chicken because it becomes too expensive, you might substitute fish instead. Second, complements -- the goods and services that go together with the substitutes -- also enjoy demand growth. For example, you might end up consuming more chips now that you are eating more fish.

The food example is a bit silly, but we see this phenomenon repeatedly in business. As a prime example, when the cost of computing power dropped, we started using more of it. This included areas where computing was previously absent, like in photography, which switched from chemistry-based to digital. Likewise, the demand for complements of computing power, such as nice monitors, also went up, while the demand for complements for things that got substituted, such as photo paper and chemicals, declined.

We can use this basic framework for analyzing the shifts that are now happening in the economy, and the ones that are still to happen.

In the Covid-19 pandemic, the main substitute for the analog movement of people and goods is the digital movement of them. Our analysis here starts from that core observation's unfolding across time in three waves.

First Wave: Shock and Substitutes

The First Wave of the Great Reboot is dominated by the shock and the responses to the sharp increase in the costs of movement -- for people more than goods. Lockdowns happen in a widespread fashion, and moving in the analog world costs so much that the demand for most things that require it drops. Only the most essential services using that input remain in operation: hospitals, groceries, and pharmacies.

Short-Term Substitution

Every product that can quickly take the place of the analog movement of people for the digital alternative does so. The rise in demand for alternatives happens first in the industries where substitutes can be found quickly, even if they are not easy. In the U.S., the first wave of 26 million people losing their jobs in the initial weeks of the crisis is overwhelmingly coming from industries affected by the First Wave. 

In-home dining, meal deliveries, and sourdough starters are substitutes for restaurant meals. Zoom substitutes office work and social interactions. Live entertainment, travel and tourism gets displaced by Netflix and in-house activities like drinking and crafts like painting (watch out for digital "wine and painting" parties).

Zoom stock prices in 2020, compared with S&P 500

For small business owners, we see a similar trend in the data from the Inc. Entrepreneurship Index. The industries first hit are the ones in the "fast-to-substitute" categories, as well as locked-down ones.



Small Business Job Growth

3-Month Change, as of March 2020

Leisure and Hospitality


Professional and Business Services




Other Services (except Public Administration)


Education and Health Services


Trade, Transportation, and Utilities




Financial Activities


Source: Inc. Entrepreneurship Index, via Paychex

As of April, we are still in the First Wave, with the Second Wave beginning to show up.

Second Wave: The Rise of Complements

In the Second Wave of the Great Reboot, just starting now, costs for the analog movement of people and goods remain high, even with extensive policy action. Over time, the economy starts to substitute things that were not so easy to switch in the First Wave.

Canceling global travel and scheduling a video conference for a sales call is relatively easy. Changing your supply chain so it relies less on fragile global pipelines is hard.

Look for things like accelerated automation in manufacturing, drone deliveries, and 3-D printing as a substitute for over-complicated supply chains -- something we already see with innovators printing medical parts when conventional versions are in short supply.

An additional effect of the Second Wave will be the rising demand and value of complements of digital movement of people and goods. For instance, demand for better internet and cell phone infrastructure. People and organizations that can perform well even during lockdowns will enjoy enhanced value--think about digital nomads and companies like Automattic, the maker of Wordpress, which has had remote-only workers for years.

Third Wave: The New Normal

Once we have the pandemic reasonably under control with vaccines and treatments -- which will take 12 to 18 months, based on most estimates -- the movement of goods and people will revert in cost and risk to precrisis levels, although not quite.

Whiplash Effect and the Roaring 2020s

As costs go down, we will see a whiplash effect. The world will revert in droves to the patterns from pre-COVID-19 times. Part of the effect will be economic (it's cheaper) and part will be emotional -- after being cooped up for so long, we will crave human interaction. For example, the end of the 1918 flu pandemic (and of World War I) 100 years ago was followed by the Roaring '20s.

Downstream Effects

Nonetheless, our levels of in-person activity will be lower than pre-crisis for three key reasons. One, the fragility and hidden risks of getting around will be on our minds. Two, the world's digital infrastructure will get cheaper and more efficient, as a result of the Second Wave. Three, we will realize that some digital alternatives are just as good or better than their analog counterparts. This new normal will have several downstream effects:

  • automation of manufacturing and agriculture will continue to grow

  • human-less logistics will remain

  • local-first supply chains (helped by, for example, 3-D printing) will gain strength in contrast to global-first chains

  • the returns to being located in a exciting, expensive city like San Francisco or New York or London will go down, and people will be more inclined to live in less expensive places

A similar rationale will apply for aggregate demand: While it is difficult to predict when total demand (and GDP) will reach pre-pandemic levels, we can expect the composition of the demand to be quite different. Some industries particularly susceptible to the high risks (and stigma) of contagious diseases might take a lot longer to get back up. 

At this stage, the new operating system for the economy in the Great Reboot will be completed, and it will define the next decades of our world.

What the Great Reboot Means for Your Business

When looking at the big picture of the Great Reboot, there are four main takeaways for entrepreneurs.

First, help your loved ones and your community get through this. We are living through the deadliest pandemic in generations, one that will take a tremendous human toll. This is a unique opportunity to help and get close to one another.

Two, make the right choices for your business to survive. Although there will be winners and losers, we will see mostly losses in the short term. Research by Startup Genome, where I serve as chief innovation officer, shows that an astounding four out of every 10 startups globally will run out of money if they do not raise additional funds and expenses and revenues remain as they are.

Third, take advantage of the opportunities in complements and substitutes that the Great Reboot offers. If your business is not well equipped to survive or thrive in the first or second waves, plan for the third. As my friend Dane Stangler writes, half of the Fortune 500 companies started during a contraction, and as Startup Genome's research shows, more than 50 unicorns started in the Great Recession.

Fourth, and most important, be careful not to think that when the economy reopens normal service will be resumed. The economic shift from analog to digital is taking place at hyperspeed. We will come back to a new operating system unlike we had before.