The rise of a frictionless business model…

Long before it was possible to “CC” an infinite number of recipients on virtually any and all electronic communications, a so-called “carbon copy” was the circulation method of old typed, or written documents, placed over carbon paper and the under-copy sheet itself. When copies of business letters were so produced, it was customary to use the acronym "CC," before a colon, and below the writer's signature, to inform the principal recipient that carbon copies had been made and distributed to the parties listed after the colon (Source: Wikipedia, December 2020).

Obviously, in today’s digital world, the idea of a physical carbon copy seems downright prehistoric. Even familiar marketing channels, like radio and television, are flirting with obsolescence, at least as far as new advertising dollars are concerned. Given that the cost of being added to the distribution list of an email, or social media post, is virtually nothing, there’s no wonder that your inbox/home feed is persistently jampacked with new material. But today, we find that the world is increasingly distributing not just information, but goods and services, as though using a digital “CC: All” model. That’s to say an economic model that is effectively frictionless, and costless, in a growing number of industries, for the marginal user/customer/subscriber. Indeed, anyone with connectivity can communicate, advertise and interface today with extraordinary ubiquity, and at virtually no cost. This was the case before the 2020 pandemic completely turbocharged this phenomenon, which leaves profound implications for the post-pandemic world.

…Meets with unprecedented policy stimulus

With recent announcements about positive vaccine efficacy, combined with visibility around a credible distribution plan that can eventually create herd immunity, the pandemic era is likely close to its last innings. And thanks to historic stimulus in reaction to the onset of the pandemic, the real economy that is emerging from this crisis has a tremendous amount of underappreciated momentum. Major developed market (DM) central banks have increased global liquidity by a staggering $7.5 trillion in 2020, according to data from the Federal Reserve, the Congressional Budget Office and Bloomberg, representing nearly 30% year-over-year growth from an already large stockpile. Moreover, the pandemic version of quantitative easing (QE) has facilitated direct injections of liquidity to the real economy via monetized deficits. In fact, U.S. money supply (as measured by M2) has grown by nearly 25% during 2020, shattering previous records. Direct injections of broad money by central banks are perhaps the single most potent monetary policy tool in the modern economy. It is likely that mean-reverting velocity in a post-election, and eventually post-pandemic, world will catalyze that injected broad money to create some truly impressive nominal GDP growth going forward. It is also likely that still more doses of policy stimulus are in store for 2021.