Note that this post was written on March 3,2020 - trying to be cheerful. Update March 19, 2020. Stay home even if you are not sick. Stop the spread!
It's hard to remain calm when one was expecting the Dow index to cross 30k and it's in the 26K range. - in a matter of days despite interest rate reduction.. If the Louvre museum is closed and Mona Lisa has a mask things are getting serious. Coronavirus is dangerous but the panic is even more dangerous. Why is the panic so acute? Here are some thoughts:
- The world is global: People travel - a lot- and economies are intertwined through business, education and tourism. People to people contact has increased tremendously in the last decade with the increase of social media. Even when you are not travelling you are in touch with whatever is going on. For inquiring minds who want to know "Coronavirus - (name of country)" on Google will reveal more than what you want to know.For the TV minded legacy media folks - the news channels are fanning the frenzy. Mike Mulvaney the Trump Chief of Staff suggested stopping watching TV, to calm the stock market. Great idea, but hard to do..... because...
- Slow motion Horror Movie: The Horror movie genre has crossed $1 Billion and is a high growth segment of the movie industry as per Variety magazine. And you are getting a slow motion movie unfolding on TV complete with a global cast, reporters all over the world trying to keep that right "panicked but brave" look.
- Politics is local: Politics is local because local people vote. Politicians are held accountable and taking action like closing schools,quarantine seem like forceful actions and the watch words seem to be "we are doing enough".
- Supply Chain Risk: is one of the fundamental concepts in managing risk in supply chains. The basic idea is that you never source any physical goods from any one factory. Naturally larger factories become cheaper and it's hard for supply managers to justify why they source more expensive product from a different country or location. In the digital world - things are simpler because you can have software in the cloud and that is physically backed up in different places.
- Value Chain Impact: The back end of the value chain to the organization is the supply chain and the front end of the distribution channel including the wholesaler and retailer to consumer is the distribution channel. If people don't travel then industries from airlines, cruises, sporting events are all affected. And this slows down the back end supply chain and the all associated economic activity. The run on face masks, liquid soap and sanitizers is not helping calm the panic.
- Social Media Frenzy: Just open your social media including Whattsapp and be surprised by the amazing types of cures and prevention techniques that are being shared around.
On a more serious note a 1.4 to 2 % mortality rate for the coronavirus COVID-19, is very serious when compared to the 0.1% mortality rate in the seasonal flu. It turns out that most of the mortality is among older people with underlying health conditions. But if you are older and have health conditions there is the Framingham score of your cardiac risk in the next 10 years.
One guesses that the prospects of 2% mortality within weeks does sound more scary than 2 % cardiac risk in the next ten years! It is probably the imminent threat is what is causing the panic. Younger people at lesser risk seem more worried about quarantine uncertainties.
We will overcome this soon and as the Corona virus slows down, maybe we'll all become more alert to respiratory infections and be more amenable to taking timely flu shots that should hopefully contain an antidote by the next flu season. Meanwhile washing hands frequently and staying home if you feel sick is all that is needed.