A half glass empty and half glass full view on the pandemic…
For weeks, I did not want to write about the pandemic. I was concerned about the developments and I had to cope with it for myself.
As I’m sitting home, I can’t overhear all the noise and all the short-term thinking around the pandemic. There are so many people in panic that on the one side neglect any civil behavior (e.g. fighting over toilet paper) and on the other side try to exploit the situation financially (e.g. by stacking up essential health supply).
I don’t want to discuss the health aspect of the pandemic as I’m not a doctor and there is still not sufficient data to make any valuable statements. But it is certain that we can’t stop the crisis with the same short-term thinking and actions that have brought us here. So, please take this seriously and show your best character by staying home.
I don’t want to underestimate the current situation. I have been very aware of the first, second and third-order impacts of the widespread of the coronavirus for weeks at a time where most identified the problem just in China.
Therefore, I decided for the first time in my life to completely keep my portfolio in cash and not equities. I decided to wait and watch along the sidelines but somehow I have a deep feeling to contribute in a meaningful way to this difficult situation.
The truth is: there is always a half glass empty and half glass full view on the current developments.
Here is the half glass empty view (credit to Chamath Palihapitiya):
- Unnecessary deaths of good and earnest people — Reason: Unprepared hospitals and underdeveloped healthcare systems lead to war-time triage decision making who will be served or not. Unfortunately, countries that have an underdeveloped healthcare system have to deal with the negative consequences.
- Massive unemployment — Reason: Consumer confidence zero, tourism crippled and social gatherings of all forms disappear for time being. These things support, directly and indirectly, a whole host of industries and businesses.
- More nationalism — Reason: advocates for closed borders and nationalized economies will have valid arguments for restrictive policies.
- Wealth destruction for anyone holding stocks and bonds or any other securities — Reason: Supply shock leading to demand shock has diminished confidence in the long term prospects for all companies all over the world.
- Small businesses of many forms will need bailouts—Reason: Insufficient working capital to cope with an 18-month economic downturn.
- Major industries will need bailouts — Reason: Poor balance sheets that have too much debt but no cash lead to financial distress. Tavel related companies and many other indirectly related industries need bailouts.
- Credit bubble might pop — Reason: Too many companies become zombie companies and can’t pay back the debt
The outlook is not promising at all but there is also the half glass full view on the impacts of the coronavirus. I think that most of the positives will slowly develop but over time they will ultimately prevail.
- More scientific world view— For months, scientists around the world have warned governments of the impact of a pandemic and when it hit us in form of the new COVID-19, they ignored the facts and lagged with rigorous actions. It is ultimately the time to listen more to science and to react to it in a meaningful way. For centuries, governments did not take science seriously as it did not serve their interest.
- Better healthcare systems and more hygiene measurements—As more people understand the ultimate value of health, we need to demand better healthcare systems for everyone. The notion of hygiene like washing hands will make many places and experiences safer for the overall community. It would be wonderful not to catch the flu when traveling on an airplane.
- Digitalization, especially of old laggards — As more people experience work from home and home-schooling, it will be more common practice. Companies and governments will need to enable digital technologies to support daily life and activities. Why can’t we sell from home and vote online?
- Change in consumer behavior — While staying at home people start to embrace a more modest lifestyle. Why do I need ten pairs of jeans when three are sufficient?
- Transition to renewable energy — I believe that people become more aware of how fragile this planet has become because of our impact. We should not again fail to listen to science and act decisively to defend our planet. We will have to finally get fixed our own created problems like climate change with caring more about sustainability and deploying it.
- Reallocation of capital to more efficient companies —Companies that have lagged behind will be in a difficult financial situation and can only cope with it when truly innovating. Capital will be redistributed from old industries to only innovative companies that have sustainable growth in the future.
- Being more value-driven — During such times, the true values of empathy, trust, and kindness are emerging and ultimately they are always wright. Those values will not change but become more and more important.
While I believe that the Coronavirus is a wakeup call for many further developments, it will not stop but rather accelerate the further advancement of humanity e.g. transition to homeschooling, drug development and cures, and remote work. I don’t think that we will cure everyone, but let’s start to work together to make this planet better.
Let’s focus on the long-term and be greedy about it and let’s make a dent in the universe. Stay healthy. Stay hungry!