2020 has been a year of instability and upheaval, so it’s no surprise many of us have been especially focused on our security. And that comes in many forms – securing our health, our homes, our finances, and even our digital lives. We used to talk about ‘safety in numbers’ – but during the pandemic as we’ve been in quarantine and isolation, we’ve had to rethink what security looks and feels like today. In this episode, hosts Shannon Murphy and Erin Shea explore how this need for fortification has been accelerated by work-from-home orders and lockdowns, and how this year has changed our idea of security for good.
2020 has been a year of instability and upheaval, so it’s no surprise many of us have been especially focused on our security. And that comes in many forms – securing our health, our homes, our finances, and even our digital lives. We used to talk about ‘safety in numbers’ – but during the pandemic as we’ve been in quarantine and isolation, we’ve had to rethink what security looks and feels like today.
In this episode, hosts Shannon Murphy and Erin Shea explore how this need for fortification has been accelerated by work-from-home orders and lockdowns, and how this year has changed our idea of security for good.
Featuring Dominic Lester, Jefferies’ European Head of Investment Banking, and Ramin Safai, Jefferies’ Global Head of Information Security.
Also featuring:
THOMAS SMYTH
Well, I think people have a new realization that financial security in America is actually quite precarious.
CHRISTIAN CERDA
We absolutely see our mission in terms of providing real security...but we also know that part of the benefit that we provide is a sense of peace of mind.
DIANA ANDERSON
There's so much more to safety than just infection control.
ERIN SHEA
I’m Erin Shea.
SHANNON MURPHY
And I’m Shannon Murphy. This is Invisible Forces - an original podcast from Jefferies.
On this show, we’re investigating the unseen forces that drive our spending, our saving and our global economy. Things like Customization, Localization and Inclusion.
ERIN SHEA
We’re asking, in the next five years, how will we be living? Where will we be living? What will we be buying? And why?
And today -- how are we keeping those things - and ourselves - safe?
Today’s invisible force is Fortification.
SHANNON MURPHY
American psychologist Abraham Maslow identified a “hierarchy of needs” in the 1940s -- the idea is that if human beings don’t have their basic needs met - things like food, sleep, and shelter - we can’t even begin to think about our psychological and social needs - like our relationships, self-esteem, or professional ambition.
And one of the most basic needs on the Maslow pyramid is safety. But that need for safety and security is also a major driver of consumer behaviour. For many people in the western world, safety is something that is generally taken for granted.
So major world events like 9/11 or the 2008 financial crisis can really shake our sense of safety and we react, sometimes in extreme ways.
How we are feeling and thinking about the world has changed this year in response to COVID -- we’re staying behind closed doors, building walls, wearing masks, and are hyper alert to unseen dangers. That’s Fortification.
ERIN SHEA
On today’s episode, we’re going to dive into a variety of ways this force of Fortification is making itself known in industries and markets around the world. It’s especially hard at work in the midst of this year’s global pandemic, when almost everyone’s personal sense of safety has been shaken to its core.
And that sense of safety starts at home.
CHRISTIAN CERDA
Security is more than anything a psychological need. It’s this longing for peace of mind.
ERIN SHEA
That’s Christian Cerda - he’s the CEO of the home security company SimpliSafe.
Home security is a $53 billion dollar market -- and growing fast. It’s expected to grow to almost $80 billion in the next five years.
CHRISTIAN CERDA
So when COVID started, I think that there was a generic sense of uncertainty and the way that all of us, we, all of us would try to deal with uncertainty is, is trying to get control more control where we can.
ERIN SHEA
The pandemic has shaken up everyone’s sense of safety, and given many people new things
to be afraid of. So the natural response is to try to take control of things you can control.
CHRISTIAN CERDA
We know in general, right, that people get triggered to install and buy a home security system after they have gone through a life change event.
ERIN SHEA
Personal life events like moving house, or having a child -- but what about a global pandemic?
CHRISTIAN CERDA
You can also scale it up and take it to a society level. When there is a big shock, right, that, sends a reminder of the need for security across the whole population, we see a surge in the need for home security services.
ERIN SHEA
So it makes sense home security is an industry that tends to do well in times of uncertainty and
bad news.
CHRISTIAN CERDA
When we look at the home security industry in historical events, we know that, uh, when 9/11 hit the industry was very resilient when the economy has been through recessions, the industry has been very resilient. All of these events that remind the consumer of their need to be safe, uh, are usually, uh, strong triggers of demand for us.
ERIN SHEA
And Covid is no different.
CHRISTIAN CERDA
And even though our year to date growth is around 50% year on year, lately, we are hitting 70-100% of increased demand.
ERIN SHEA
So we can see our Invisible Force of Fortification at work as people invest more in home security. But that’s not the only place where our sense of safety has been shaken. The pandemic has also brought many Americans’ fears about financial security to the forefront.
SHANNON MURPHY
COVID has created a sense of economic uncertainty that we haven’t seen since the 2008 global financial crisis. But this time, there is one crucial difference.
DOMINIC LESTER
First and foremost, I think the difference between this crisis and the last financial crisis is that we forced consumers to immediately stop a great proportion of their discretionary spending.
SHANNON MURPHY
That’s Dominic Lester, the European Head of Investment Banking at Jefferies. We heard from him in the last episode, and he also spoke with me about how COVID is affecting people’s spending and saving habits.
DOMINIC LESTER
So I think your average consumer will be looking at their credit card bill during the lockdown saying, you know, I'm spending a quarter of what I've spent in the past and do I really need to spend as much money as I have. Does it really bring me that much more pleasure and happiness? … You know, when you go through that thinking, I do think consumers between, you know, learning that they don't need to spend as much money as they did, uh, by being forced not to spend money, uh, during the lockdown. And, um, you know, and having to think about, you know, retirement and savings are gonna, you know, there's going to be a big emphasis on increased savings. So I do think there's going to be a shift in the mindset away from sort of consumption, fueled by credit you know, to increase savings.
SHANNON MURPHY
And Dominic thinks this instinct to save -- to fortify our finances -- is going to last for a while. After all, we still have scars from the global financial crisis, when Americans lost 2.6 million jobs and nearly 10 TRILLION dollars worth of wealth was wiped out.
DOMINIC LESTER
I do think that the general sense of security and optimism, you know, has been shattered now a few times, um, you know, there isn't, there isn't a lot of job security, I think consumers in the United States will become, you know, more frugal again.
ERIN SHEA
And Dominic Lester isn’t the only person looking out for how that move towards ‘fortification’ is having an impact on various industries.
For many people, the COVID lockdown was an opportunity to assess their day to day habits -- especially their financial habits.
THOMAS SMYTH
We have seen a huge uptick in demand and our business is actually stronger than it was in March because every American is sitting at home wondering what the heck to do with their finances, right, because of the macro-economic situation. And second, they actually have time to explore this stuff.
ERIN
That’s Thomas Smyth -- he’s the founder and CEO of Trim, a financial health platform. Last spring, Forbes reported a 20% user increase of budgeting apps category-wide since the pandemic started.
Trim was founded in 2015. It’s a platform that uses AI to find its users savings on bills. It also helps identify unnecessary spending.
THOMAS SMYTH
I think people have a new realization that financial security in America is actually quite precarious. So I think you've got a lot of Americans who, went to the brink and kind of looked over and went, wow. You know, I have a lot less job security and a lot less financial security and a lot less than my savings account or retirement account than I had hoped and that I need.
ERIN
Thomas says that in a typical year, January is the biggest month for financial health apps like Trim. Which makes sense, since people are often trying to start new habits at the beginning of a new year. But the pandemic has changed things.
THOMAS SMYTH
And I think we're seeing kind of every month since the pandemic has begun, looks like January, cause people, you know, make a new resolution. Hey, now now's the time.
ERIN
Thomas’s app is designed to help individuals with their personal finances. But he acknowledges that true financial security is a systemic, social issue.
THOMAS SMYTH
My hope of course, is that there's more pressure on the folks at the top who are generating, you know, huge, huge, huge amount of wealth in the past five months, that there's more pressure on those folks from the government and from the folks at the bottom to figure out what to do with our structural income inequality in this country.
ERIN
But the good news, he says, is that our invisible force of fortification might actually be getting to some of the people who can do something to help.
THOMAS SMYTH
I was on the phone with one of our investors the other day and he's definitely a free market capitalist kind of guy. Right. And he was talking to me about this. And so I think there is a growing sense that either the federal government or the private sector needs to step up and figure out what to do about economic precarity in America. And because it's the defining problem of our age, I think.
SHANNON MURPHY
So we’ve seen our Invisible Force of Fortification at work at home and in our wallets. And the way we’re keeping both safe these days is by going digital. In fact, we’re living in an era where people are often more concerned about locking their phones than locking their door.
According to a report, in 2019 financial apps -- which includes budgeting apps like Trim, and also online banking apps -- were opened more than a trillion times. We access our money online. We invest our money online. And we want to know that it’s safe there. That our online bank accounts won’t get hacked.
And when so many people made the switch to working from home, thousands of companies and organizations had to beef up their digital cloud security overnight. Workers needed to access everything remotely -- and without the risk of a cyber attack.
Which means Fortification has become the most important force in the realm of online and digital security. In fact, by 2021, cybersecurity is going to be a one trillion dollar industry.
RAMIN SAFAI
About five years ago, we started seeing very severe attacks against organizations and as a result, companies started to pay more attention to cyber security and it grabbed people's attention because it became a everyday news event. In my opinion the organizations have paid a lot more attention in the past five years.
SHANNON MURPHY
That’s Ramin Safai - he’s the Chief Information Security Officer here at Jefferies. He’s the one who has made sure that we could go from a main office and some satellites, to more than 3,000 individual home offices as we and our coworkers started working from home.
And unfortunately, he says, the past few months have seen an increase in opportunistic hacking attempts.
RAMIN SAFAI
In the past few months, we've noticed that there has been a 60% increase in the volume of the phishing and malware that comes to their users. My first recommendation is, do not trust the email that you receive, always call the vendor directly. For example, I received this email yesterday from PayPal and I use PayPal all the time and the email looked extremely legitimate. It had all the right logos, all the right information. In fact, it had the right phone number for Paypal, but it was not legitimate. It was pretending that I am overdue on some of my payments and the fact that I should immediately log in. So be very careful with these attacks. They're very simple and yet they are very effective.
SHANNON MURPHY
But as hackers get more creative, the people defending our digital security do too -- and their work is becoming more and more important and valuable.
And Ramin is excited about the future of cybersecurity -- which aims to make it as easy as possible to stay safe online. This is crucial as our digital lives and our analog lives become more and more intertwined. e don’t just “go online” anymore -- we’re always online, even when we’re just out and about. But instead of forgetting to lock our doors and windows, we’re at risk of people draining our bank accounts,or stalking our kids, or stealing info from our cloud workplaces.
RAMIN SAFAI
And one of the areas that we see as exciting is the development around automation of user verification and a passwordless environment. If I ask you right now, what is the one thing that you hate about security? Probably your answer is user ID passwords. You know, you have to memorize those passwords, eight character minimum, you know, sometimes 15 character minimum, and they need to be complex. So we are hoping that we can really look into this and by using a new generation of products, overcome this password management.
ERIN SHEA
But while our homes, our computers and our bank accounts are feeling this reinvigorated need for fortification, almost no space has been as affected during this pandemic as the healthcare industry.
While parts of the industry push forward on making us masks, and finding a vaccine -- more and more people are needing to ACCESS healthcare and needing to feel safe in those places. That's true whether it's COVID or some other health issue that takes them there.
DIANA ANDERSON
I have to say with respect to COVID and the pandemic it's really come to light, how much the built environment and spatial design can impact health.
ERIN SHEA
That’s Diana Anderson. She calls herself a “Docitect” - meaning she has a medical degree and is a licensed architect.
She combines those fields to specialize in healthcare design. And she says that since the pandemic, people are thinking about safety in healthcare design in a whole new way.
DIANA ANDERSON
So healthcare design in general for hospitals, let's say, has really focused on public areas, the front facing public areas have become much more open. You walk into a hospital or clinic there's larger waiting rooms, public areas, trying to draw people in, integrate hospitals and healthcare facilities with the community. I think that that trend will probably change and we're already finding our clients coming to us and saying, you know, we can't obviously have these open environments. Not only does it pose a risk, but I think people feel unsafe going into these spaces, knowing what we know about SARS COV-2 and COVID-19, so I think that trend will definitely start to change and we'll probably see less open space and much more sort of segregated space or at least spaces that can be very flexible in terms of the front facing aspects of the building.
ERIN SHEA
What looks safe and feels welcoming has certainly changed since the pandemic began. Designers now need to think about infection control, sanitation and distance in every healthcare space.
DIANA ANDERSON
I think, you know, feeling physically safe is definitely one aspect, but also feeling mentally, but also socially safe and probably socially safe in the context of COVID is really relevant, right? Because it has to do with proximity to people, and it's becoming harder to obviously congregate and to meet with people. So how do you feel socially safe, but still maintain that connection? And so one challenge I think architects are facing. And so is everyone in healthcare is how, you know, what makes a space safe in healthcare, but at what cost. And so for an example, you know, it's obviously safe if someone has an infection to put them in their room and shut the door, right. And to isolate them so to speak. But that comes at a very great cost in terms of quality of life and social interaction, which we know can have detrimental health effects.
ERIN SHEA
So as designers pivot to make spaces safe, physically and mentally, they have to be creative. Some of the changes that have made hospitals safer are pretty simple retrofits.
DIANA ANDERSON
So for an example in New York city, when it was really the epicenter of a few months ago, my critical care colleagues said, you know, in the ICU, all of the doors are generally glass so that, you know, visibility in a critical care environment is important. We have to be able to see patients because they can deteriorate or decompensate very fast, but on an acute care floor, the doors are generally solid. You know, you could close your patient room, door and not see anything. Well in New York they were finding they had to be able to see patients. They were just so critically ill in all spaces. So they were actually coming up with a saw and cutting vision panels into the solid door. And so, you know, now we're talking about should all doors in hospitals have vision capability.
ERIN SHEA
This is a moment of huge change, as our idea of healthcare security is shifting before our eyes. Diana sees this as a chance to reimagine the fundamentals of what healthcare looks like.
DIANA ANDERSON
We've imagined the intensive care unit of the future, you know, wrote an article a few years ago of what does the ICU in 2050 look like? So we actually envisioned a critical care capsule where patients could be in a capsule. We probably wouldn't need to intubate them. We devise some kind of breathing helmet, which would be a lot less invasive or sensors on the skin where we would assess blood levels without actually having to poke with a needle. Um, it's, you know, it's a little far-fetched, but it's maybe not that far off. And interestingly, when we looked at the image we sketched out of patients lined up in capsules, we suddenly realized, you know, what does this remind us of? And you know, it really looked like the iron lung, which we had a number of decades ago, right. And people, you have pictures of people lined up in a gymnasium with all these iron lungs. You know, drawing from history is really important too. We're learning from the tuberculosis sanatorium from the 1920s, we're still taking lessons from those designs.
ERIN SHEA
Just as those historical images of people in iron lungs echo through history and are reflected in more modern designs, so our need for safety reverberates through the decades as well.
SHANNON MURPHY
The basic human need for safety is not going away - which means that our invisible force of fortification may be the most enduring one that’s shaping the way we live, work and spend. And security comes down to more than our personal needs. Ultimately, fortification is the force that determines how our societies operate. And we shouldn’t under-estimate how much the pandemic has affected our sense of security.
Here’s Jefferies European head of investment banking Dominic Lester again.
DOMINIC LESTER
COVID has sort of shaken a little bit at the foundations of the economy, and the American dream. If I look at the US I think it has shaken through the foundations of the sense of, um, strength and security that people have, particularly in the United States in that one - it's exposed, uh, the fact that consumers haven't created adequate savings for their retirement; two - that from a healthcare perspective, the country isn't prepared to tackle these crises, from an organizational standpoint, doesn't have the safety net for individuals who are dependent on basically employment for, for health insurance to deal with, with these health issues when they arise.
So I think all these things that coming together and COVID has been kind of in some way the spark that's ignited this crisis in confidence that individuals have in the system and which I think will lead to, you know, people taking all kinds of measures to increase their job security, their financial security, you know, the dependence on technology as well.
SHANNON MURPHY
Like Dominic says, COVID has brought so many primal concerns - like health, financial and digital security back to the fore. But with that shake-up comes opportunity as well. Creative technological developments and conscientious policy can hopefully pave the way to a safer and more secure future for everyone - physically, financially and health-wise too.
DOMINIC LESTER
But I do think that there's a lot of opportunity in some of these other areas that ultimately a very positive net, I should think in a way COVID is a trigger for some good longterm trends. And also, you know, to me, reducing this consumer mentality from this sort of excessive consumption mentality is a good thing, you know, and you needed kind of a bit of a crisis to get people to change their habits.
SHANNON MURPHY
Although we are definitely witnessing a period of enormous change, ultimately, Dominic thinks this trend toward fortification may be a positive thing.
DOMINIC LESTER
I do think when I look at that younger generation, cause that always defines how the world evolves a little bit. I think they have a totally different mindset, they’re much more about sharing. It's not just sharing resources to reduce costs. It's just the concept of being more egalitarian. And they see the mistakes that the previous generation has made. And I think again, COVID has forced people to think about things more seriously. You know, it's also created enough of a crisis. That's shaking people out of their complacency. So I'm actually very optimistic for the future. Very optimistic.
SHANNON MURPHY
I’m Shannon Murphy.
ERIN SHEA
And I’m Erin Shea. You’ve been listening to Invisible Forces - an original podcast from Jefferies.
Next week, we wrap up our second season with an episode about what will probably be the most important and defining invisible force of this generation when it comes to how we live, work and treat each other -- don’t miss our season two finale all about Inclusion.
DISCLAIMER
Important information and additional disclaimers are available at Jefferies.com. This podcast should not be copied, distributed, published or reproduced, in whole or in part.
The information contained in this podcast does not constitute research or a recommendation from any Jefferies entity to the audience. It’s not an offer or solicitation of an offer to buy or sell any security or investment. This podcast is being provided strictly for informational purposes only. Any opinion or estimates constitute our best judgment as of the date of the podcast and are subject to change without notice.
The information upon which this podcast is based was obtained from sources believed to be reliable but has not been independently verified and should not be relied upon as an accurate representation of future events. No responsibility is accepted, and no representation, undertaking or warranty is made or given, in either case, expressly or impliedly, by Jefferies as to the accuracy, reliability or completeness of the information contained herein or as to the reasonableness of any assumptions on which any of the same is based. Any views or opinions expressed herein are solely those of the individuals identified. Accordingly, neither Jefferies nor any of its officers, directors, employees, or representatives will be liable for any direct, indirect or consequential loss or damage suffered by any person resulting from the use of the information contained herein, or for any opinions expressed by any such person, or any errors, omissions or misstatements made by any of them.
Jefferies is not an adviser as to legal, tax, accounting or regulatory matters in any jurisdiction, and is not providing advice related to such matters. Listeners of this podcast should take their own independent advice with respect to matters discussed.