Issue 69

A lasting impact of the coronavirus

The new coronavirus (SARS-CoV-2, or COVID-19) has spread to the extent that for many countries, containment is impossible. The goal now is to delay the speed at which it moves through communities. That means cancelling public events, mandating self-isolation for recent overseas travellers and generally encouraging, or in many cases enforcing, "social distancing".

The above strategy is called "flattening the curve", which is fancy talk for attempting to limit the number of people - particularly critical cases - infected at any given time.

Failure to flatten the curve in a pandemic will overwhelm the health system, leading to forced rationing and many more fatalities than necessary:

With no clear sign of when the epidemic will spike, anaesthesiologists and doctors are being called on to make increasingly tough calls on who gets access to beds and respirators when there are not enough to go around.

"It is a fact that we will have to choose [whom to treat] and this choice will be entrusted to individual operators on the ground who may find themselves having ethical problems," said a doctor working in one of Milan's largest hospitals.

For now, the marching orders are: Save scarce resources for those patients who have the greatest chance of survival. That means prioritizing younger, otherwise healthy patients over older patients or those with pre-existing conditions.

One form of "social distancing" is avoiding the workplace. We're still on the far left tail of the pandemic curve here in Western Australia, but I expect to have to work from home in the very near future.

And to be honest, the option is long overdue.

The gradual shift to more flexible working arrangements has been happening for some time, despite setbacks stemming from some short-sighted research and push-back from "old school" managers and executives (likely because they're the ones who would have to adapt the most to the change):

The [remote work] movement was slowed by a mid-decade backlash, headlined by former Yahoo CEO Marissa Mayer’s 2013 ban on employees working from home. Aetna, Best Buy, and IBM also moved to curtail the practice in subsequent years. They were acting on research that suggested a remote workforce is bad for collaboration.

In just the past few years, however, that equation has changed. Workplace communication software, such as Slack and Zoom, has moved both the water cooler and the conference room online. Enterprise platforms like Asana and Jira, Salesforce and Netsuite, G Suite and Office 365 look the same whether you’re in the office or in a different country. Corporate VPNs extend the company firewall to remote devices.

While it's true that it's also not yet possible for all workplaces to shift to a remote work model, many of today's jobs are already just as ably performed from home as they are in an office, a mine site or a port.

The coronavirus has effectively forced a large, real-world experiment, with many organisations forced - whether prepared or not - to send their employees home. Suddenly apps like Slack, which are costly time sinks in an office setting, start to add value in terms of real-time collaboration (but please if you're considering Slack, at least try a privacy-friendly option first, such as Keybase Teams).

The transition to working from home over such a short period of time will be messy and challenging for employers, as not all are equipped to deal with it equally. But I suspect that, given enough time, many will be surprised by how easy the transition actually is and how little productivity is affected, if at all.

As you might expect, Silicon Valley leads the way, with many companies already fully remote. Here is GitLab's "remote manifesto":

  • Hiring and working from all over the world instead of from a central location.
  • Flexible working hours over set working hours.
  • Writing down and recording knowledge over verbal explanations.
  • Written down processes over on-the-job training.
  • Public sharing of information over need-to-know access.
  • Opening up every document for editing by anyone over top-down control of documents.
  • Asynchronous communication over synchronous communication.
  • The results of work over the hours put in.
  • Formal communication channels over informal communication channels.

This is one of those occasions where, given the choice, you don't want the experiment to happen. Many people will die and the world will likely fall into a deep recession as a result of this virus (mostly from containment efforts/restrictions, rather than the virus itself). But at least there might be some lasting good to come out of it.

Other bits of interest

The UK's controversial coronavirus strategy

We're getting natural experiments in disease control, too. There have so far been two strategies in dealing with the virus, full containment (e.g. China, Singapore), or herd immunity. The UK appears to have opted for the latter:

Dr David Halpern, a psychologist who heads the Behavioural Insights Team, said on BBC News: “There’s going to be a point, assuming the epidemic flows and grows, as we think it probably will do, where you’ll want to cocoon, you’ll want to protect those at-risk groups so that they basically don’t catch the disease and by the time they come out of their cocooning, herd immunity’s been achieved in the rest of the population.”

Infect the young and healthy (gradually - so still ban large gatherings, but leave schools open), isolate the vulnerable, and hope that after a bit of time the virus is no longer able to spread effectively. The only problem is we don't yet know how long immunity to this virus will last - for life, or just a few months? Will it just boomerang back next flu season and infect everyone all over again anyway (this is an even bigger risk for 'containment' countries)? It's too early to know, but the UK is definitely taking the higher risk, higher reward option.

Links:

Against a stimulus response

Arnold Kling writes:

I believe that the best macroeconomic response to the virus crisis would be what I call forbearance. Bank regulators would tell banks that they will be allowed to fall below minimum capital requirements. They will be allowed to write down the value of loans without having to raise capital as a result. They will be encouraged to in turn offer forbearance to borrowers, provided that there is a reasonable prospect that borrowers will be able to get repayments back on track once the crisis has passed.

Under this policy, it will be up to banks to decide which borrowers are in short-term difficulty and which borrowers are never going to recover. If I were at a bank, I would bet on airlines coming back. I would not bet on cruise ships coming back.

I concur that fiscal stimulus and monetary easing will not help much in this crisis, where much economic activity has effectively shut down due to the coronavirus. Central banks should keep the plumbing operational to prevent an unnecessary financial crisis, but that's it. Fiscal support should be targeted where possible, healthcare obviously but also helping businesses that can survive with a little short-term help. No blanket bail-outs. For example it's not clear, as Kling notes, that cruise operators should be bailed out. Or, say, highly leveraged US shale producers.

Links:

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Issue 69: A lasting impact of the coronavirus was compiled by Justin Pyvis and delivered on 16 March 2020. Feel free to send feedback, suggestions for future issues, ideas, insults, or pretty much anything that crosses your mind to their Keybase or Riot.im account.