Sunday, April 5, 2020
Coronavirus Long Term Thoughts
Updates) Ontario numbers have been higher than I was hoping they would be, so I'm revising my estimate upwards again from 3-5k to 8-12k. In this wave, i.e. till about June 1st. The numbers in the last two days have been encouraging in terms of being flat in number of new cases - hopefully this shows that our measures are working, and we can now expect a few more days of flat before we start to see a slow decline. Obviously if they don't stay flat, my projection above is once again garbage. Ontario itself released models, which was super fascinating. Watch the April 3rd news conference. I agree with almost everything that was said, and I applaud Ontario for being brave enough to release the "sobering" projections. It's especially great to hear that their prediction show us having enough surge capacity in the health care system to meet the expected number of ICU/ventilators needed. The only thing I really don't understand is the projection for 3000-12000 deaths in the next 18 months (slide 13). They say they are hoping to keep the current wave to 200-1600 deaths (slide 12) depending on new measures we take soon. So obviously they feel that there will be somewhere between 1400-11400 deaths AFTER this first wave, clearly implying that they expect at least one more wave which is more serious / less contained than this wave. But surely that is preventable now? Are they instead thinking there will be a slow but steady level of infection which results in steady deaths? I ran some numbers for that, and it's 5+/day for the 18 months, which implies at least 200 new infections every day over that period - at that level we need to lockdown, so I don't understand how we can possibly get to that 3k-12k number. My suspicion is that it's designed mostly to make us know the importance of obeying all these measures, which IS a good reason. We all do need to be scared, and we all do need to stay the fuck at home (a bedtime story for adults, cover image shown above). Maybe I'm missing some third pathway though, where we can have that many deaths without either another epidemic or a steady level of infection which I think would lead immediately to an epidemic?
Data Things) Some cool links: Covid-19 Consumer Impact Tracker shows a lot of interesting charts about what's hot (DIY haircut up 221%) and what not (heels down 35%). Google released some fascinating COVID-19 Community Mobility Reports where you can see how much travel behavior has changed in pretty much all countries of the world (with the curious exception of China!). Ontario is much less locked down than e.g. Italy, but more so than California, and at about the same levels as B.C., which is several days ahead of us and clearly showing that they have it under control now, so that's quite heartening. The wikipedia entry for 2020 coronavirus pandemic in South Korea is also amazing, so much detail and charts. That's case tracking done right.
Economics & Long Term Thoughts) Some links to good reading: Cities after coronavirus: how Covid-19 could radically alter urban life. The coronavirus: A geopolitical earthquake. Social Distancing During the Black Death. Ted Chiang Explains the Disaster Novel We All Suddenly Live In. The Covid-19 crisis is a chance to do capitalism differently. Obviously there are TONS of this kind of story out there, and I've read at least four for every one that I linked here. I mostly haven't linked all the ones talking about V vs U shaped recoveries, etc.
I guess the first thing that I'd like to say is that this event is of massive historical significance. It's going to leave wounds, and cause changes, to a much greater degree than anything in recent decades - I think it'll end up being at least as significant globally as World War II, and possibly even more so. WWII really reset how generations of people thought about how we should structure society, and ushered in things like the welfare state, the Marshall Plan, and of course, the United Nations. It'd be very surprising to me if long term, this COVID-19 crisis doesn't create similar levels of geopolitical change. Here's a few obvious changes for the first decade, though of course, caveat emptor, these are all my opinions:
- Permanent reduction in global travel, both for business and for pleasure. It's going to be harder to travel, and people will be less inclined to do it. There will be much more acceptance and usage of alternative to travel, such as virtual meetings, video conferencing, and eventually, virtual reality/virtual worlds, etc. Concretely, here's a prediction for you: many airlines are going to go out of business, and all bookings for new-build airplanes that can be cancelled, will be. The world has more airplanes NOW than it's going to be using 10 years from now. Probably the same is true for container ships, but I'm less confident of that.
- The USA's status as global superpower that everyone looks to for help is over, completely done, stick a fork in it. They've done exactly zero except insult people during this crisis (see recent spat with Canada over shipments of PPE). China has been trying to step into that superpower role, but it hasn't been working, because people rightly perceive that China CAUSED this mess, with their early bungling of the virus. And they are widely perceived to be lying about it even now. All countries are going to become more nationalistic, more focused on making sure they are safe and self-sufficient. So I think the most probable outcome is that we enter a multi-polar world, similar to the early years of colonialism, where many world powers engage in a lot of mercantilism. Similar to that era, there are also clearly going to be a lot of large corporate entities as well; they were called Chartered Companies then, what we call them now is multinational companies. I'm thinking here of things like Google, Alibaba, Huawei, Amazon, etc. It'll be interesting to see if the EU, India or Africa will be able to establish some of these giants themselves over the next decade or two. At any rate, it's a world that FEELS extremely different to the globalized world that we've been experiencing for the last 30+ years.
- Optimistically: this is going to have a good long term impact on our efforts to fight climate change. Obviously emissions will be down this year for sure (shutdown economies), and likely by a smaller amount permanently as well (due to e.g. increases in working from home, decreases in long distance travel). But in addition, I'm hoping that this fight has given people are real feeling for what LAG means when you're talking about a problem which is bad, but without immediate effect. Climate change is LIKE coronavirus: the actions we all take now result in bad consequences later, it's just that the later is years instead of weeks. That will be easier to explain to people, and I think people will understand how "we're all in this together" as well. Hopefully many places will also use stimulus funds to support the renewable economy, which should hasten it by some years. We're critically late already on the climate change front, so the boost from these considerations is actually quite welcome, possibly the largest silver lining in this dreadful cloud.
- Optimistically: as with that essay above, a chance to change the way capitalism works. In the USA, one can hope that they finally see the light about the problems with their health-care system, and the way they treat low-wage employees and contractors. In the rest of the west, a chance to build more resiliency and robustness into the system, i.e. increase inventories, decrease supply chain distances, make employment systems more fair, build a sustainable, eco-friendly economy. For Canada in particular, the oil price shock (and permanently reduced demand for oil) will hopefully be the last nail in the coffin of the crazy bad oil economy in the prairies. Let's shut all that shit down for good, and move to making the future, like wind turbines, solar panels, and batteries. For Asia and Africa, a tremendous opportunity to rise to global significance - but really they have already been playing that card, so they just need to keep on keeping on. Structurally, I don't know what the 21st century equivalents to unions and the welfare state are, but we've got a chance now to invent them, so let's get cracking on that, or the disaster capitalism oligarchs will crack it in the wrong way... let's not need a coronavirus 2 (like WWII) in order to get it right this time, let's just do this once!
- That essay about social distancing during the black death had a really interesting point about vacation homes and remote villas for the rich. If you can't travel the world anymore, do the wealthy and middle class instead go in for super luxurious vacation homes a few hours outside of the cities they live in? If so, that sure seems a lot like Ontario, where so many people have cottages up north... does this change the way that the travel/hospitality/entertainment industry operates, such that cottage counties with massive entertainment resorts open up everywhere? Is it sort of like the preppers bunkers, but for everyone, and nice to live in? Or is it more like Blue Mountain, with some huge centralized expensive entertainments? There are obviously trillions to be made here if you can figure out the right answer (in detail) and sell it to people. But I guess my big take away here is: don't sell your cottage to cover your short-term cash flow problems, it's going to be worth a lot more 5 years from now.
- In terms of stock market, I suspect we're not at the bottom yet, i.e. this little recent rise is just the calm before another storm. When the extent of the damage to small and medium business becomes apparent, and the employment numbers are out, and the death of the airlines & hotels becomes obvious (we can't rescue them all, and shouldn't), I think we'll see big drops again - we're down 27% so far, and I expect to see at least another 10%. I also think it's going to be more like a U or even L than like a V, i.e. this is going to take awhile to recover from. Partly it's the shear number of companies that have long-term problems that will keep the stock market recovery from happening. Airlines, industrials (e.g. car companies), utilities & mining, any ad-supported companies, hotels, oil companies, even things like Disney (which will have to keep parks closed for likely most of 2020!), etc, will all stay down because their revenues (and thus profits) will stay down, for years. Frankly the only reason it won't be the great depression is because we're so much better at macroeconomics than we used to be (we are all Keynesians now, but also, we believe in monetary stimulus too!). But it's going to be at least as bad as the great recession. That said, I'm STILL holding my stock market index fund, because I still believe in the long term this kind of thing represents a buying opportunity and only a temporary setback. It's not the end of the world, not even the end of the financial world... capitalism is the most robust system humanity has ever invented, it thrives in times of crisis, and I expect it to continue to do so. The trick is to manage the beast so that we all benefit.
- Super Optimistically (this one actually seems not very likely to me): Americans will wake up to the importance of good governance, and stop electing people who want to destroy the government. It should be very obvious now that having a good government, which is competent, listens to experts, and that you trust is very important. Much more important than e.g. your emotional rapport with the candidate. These are life and death matters, always have been, and now that truth has been made obvious to people. If Trump had taken COVID-19 seriously, and acted competently, the way that everyone knows Obama and his administration would have, probably the USA would have ended with 10% or less of the deaths, i.e. literally tens of thousands of Americans would have been saved. I honestly hope that Trump himself sobers up a bit and issues an apology to the USA, they deserve one, and I'd like to believe that even Trump is capable of admitting his mistakes. Sheerest optimism, obviously, but hey, a man can dream...
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